The Small Business Administration rolled out a loan program that could help business owners who face a looming balloon payment on their commercial real estate loans.

Small-business owners can now use the SBA's 504 program to refinance their commercial mortgages if they face a balloon payment before Dec. 31, 2012. The SBA may later open this option to other business owners.

"We are making this initial restriction to make sure our funding goes first to small businesses with the most need," said Steve Smits, the SBA's associate administrator of capital access.

The agency's 504 loans primarily are used for real estate, but until the Small Business Jobs Act was enacted in late September, they couldn't be used for refinancing unless a business also was expanding.

Congress added a refinancing option to the 504 program because of the crisis many business owners face due to declining real estate values and the tightening of the commercial real estate financing market. When they took out their current mortgages, most business owners assumed they could refinance the loans before the balloon payment on the mortgage came due. That's no longer possible for many of them.

To address this problem, Congress made $15 billion worth of refinancing available through 504 loans. The SBA estimates this will help up to 20,000 small businesses.

"The economic downturn of recent years and the declining value of real estate have had a significant, negative impact on many small businesses with mortgages maturing within the next few years," SBA Administrator Karen Mills said. "As a result, even small businesses that are performing well and making their payments on time could face foreclosure because of the difficulties they face in refinancing and restructuring their mortgage debt."

Borrowers must kick in at least 10 percent of equity in order to qualify for these 504 loans. Applicants also have to be current on their existing loans.

For more information, see sba.gov

SBA picks mentors for clean energy firms

 

The Small Business Administration picked four business-accelerator programs across the country to provide mentoring to 100 small companies in the clean energy sector.

SBA Administrator Karen Mills said the agency eventually hopes to expand this Entrepreneurial Mentor Corps pilot program so that 1,000 small companies in a variety of industries can get "highly tailored mentoring" from experienced entrepreneurs.

The program was launched as part of President Barack Obama's Startup America initiative. The first batch of companies that will benefit from this mentoring will be selected from the more than 400 small businesses that are developing clean energy technologies through Department of Energy loans or Advanced Research Projects Agency-Energy grants funded by the economic stimulus bill.

Mentors can help these companies develop their technologies, find capital, partner with other entrepreneurs and manage the challenges of growth.

"Who better for entrepreneurs and startups to learn from than individuals who have been down a similar path before?" Mills said.

Many entrepreneurs "don't realize they need to be trained on the execution phase - many think a nifty idea is all it takes," said Rex Northen, executive director of CleanTech Open, a San Francisco-based business accelerator that is one of the four organizations chosen to participate in the Entrepreneurial Mentor Corps.

The nation as a whole will benefit from helping high-potential companies grow because these kinds of businesses "drive innovation and create good jobs," Mills said.

There are dozens of so-called business accelerators - organizations that use mentors to help startups grow their businesses faster - around the country. For this pilot program, the SBA selected four that already are working with hundreds of clean energy companies around the country.

"We are not reinventing the wheel," Mills said. "We have partnered with the best out there who already know these mentors."

CleanTech Open will receive $200,000 from the SBA, since it will mentor clean energy companies in two regions, Northern California and New England. The other three accelerators will receive $100,000. They include CleanTech San Diego, Clean Energy Trust in Chicago and the Nevada Institute for Renewable Energy Commercialization.

For more information, see sba.gov

Repeal of 1099 requirement closer

 

Congress moved closer to repealing a paperwork burden imposed on businesses by health-care reform, but there's still no consensus on how to make up for the tax revenue that would be lost by dropping the requirement.

A provision in the health-care reform law requires businesses, beginning in 2012, to file 1099 reports with the Internal Revenue Service any time they spend more than $600 a year with any other business. That's a significant expansion of the current 1099 requirement, which applies only to payments to unincorporated service providers.

The provision was included as a way to bring in an estimated $19 billion in tax revenue over 10 years to help pay for health-care reform. Expanded third-party reporting of business income raises tax revenue by making businesses less likely to hide that income from the IRS.

Small businesses complained that this provision would create a paperwork nightmare. Michael Fredrich, president of MCM Composites in Manitowoc, Wis., told a House committee that his business has 375 vendors, but only has to prepare 1099 forms for 11 of them under current rules. This takes only three hours. It would take two weeks, at a cost of $2,400, for an employee to prepare 1099s for all of his company's vendors, he said.

The Senate voted to repeal the 1099 provision as an amendment to legislation reauthorizing the Federal Aviation Administration, which passed Feb. 17. This bill calls for tapping unused federal appropriations to make up for the revenue lost by repealing the 1099 requirement.

Meanwhile, the House Ways and Means Committee approved two stand-alone bills Feb. 17 that would repeal the 1099 requirement. One of the bills didn't offset the cost of repeal, while the other bill pays for the cost by targeting overpayments of federal subsidies that some individuals will receive for purchasing health insurance beginning in 2014. Democrats charged that this offset amounts to a tax increase on middle-income Americans.

For more information, see http://www.waysandmeans.house.gov