Op-Ed – Helping Small Businesses Create Jobs by Extending SBA’s 504 Refinance Program
There is nothing small about small business in America. According to the U.S. Small Business Administration’s Office of Advocacy, there are nearly 28 million small businesses in this country, including nearly 6 million small employers. Small businesses represent more than 99 percent of all U.S. employer firms, are responsible for nearly 50 percent of all private-sector employment − employing more than 55 million workers, and accounting for nearly 43 percent of all private-sector payroll.
America’s small businesses create two out of every three new jobs and generate more than 50 percent of the nation’s non-farm gross domestic product. They also represent more than 97 percent of all exporters and produce 31 percent of exported goods. These numbers make it clear that small businesses are not only the driving force behind the economic recovery of the United States, continuing to advance our nation’s productivity.
However, when I talk to small-business owners in Louisiana and across the country, one of the things I hear most is that access to capital is still a significant challenge. As chair of the Senate Committee on Small Business and Entrepreneurship, I continue to lead efforts to address this problem.
One proposal in particular, the Commercial Real Estate and Economic Development Act (CREED), would extend a provision for five years allowing small-business owners to use SBA 504 loans to refinance existing commercial mortgages. The 504 Refinance provision allows small businesses to refinance major fixed asset or real estate debt with long-term, fixed-rate loans to help them lower their monthly mortgage payments at no additional cost to the taxpayer. It is a tool used by many banks in conjunction with local and state economic development offices to create jobs and spur economic growth.
The provisions included in the CREED Act were originally enacted as part of the Small Business Jobs Act of 2010, but they did not become operational until February 2012, significantly shortening the period of time that businesses could use 504 loans to refinance qualifying existing debt. The program expired on Sept. 27, 2012.
The program has already helped many small businesses across the country. For example, in my own home state of Louisiana, Tuffy’s Quickstop and Deli of St. Martinville purchased its facility in 2010 for $1.2 million. Through this program, Tuffy’s refinanced the debt resulting in a savings of $5,000 per month. This $60,000 a year was used to save two jobs.
Another success story happened in Virginia when Richmond Piano Rebuilders purchased their facility in 2006 with a loan. Their monthly payments became difficult to afford in December 2012, despite the property retaining its value, and threatened the company’s ability to keep the facility. Thanks to a 504 refinance loan, the company was able to reduce its payments by $50,000 a year. This savings allowed them to keep the facility open and save all 22 jobs at that site.
There are stories like this one all across the country, and when you start adding up all the jobs saved or created through the program, it makes a big difference to our economy, without costing taxpayers anything.
That is why I introduced legislation in both the past Congress and this session to reauthorize the 504 refinance program that Tuffy’s Quickstop and Deli, Richmond Piano Rebuilders and so many others have used with great success. If Congress is really serious about helping our entrepreneurs innovate, create jobs and strengthen the U.S. economy, there is no reason to delay a bill that costs nothing and has a clearly proven track record.
Extending the 504 refi program is a common-sense way to help small businesses and create jobs without costing taxpayers a single penny. By allowing small businesses to refinance qualified commercial real estate debt, this program lowers their monthly mortgage payments at no cost to taxpayers. At a time when we are still facing high unemployment, this extension is one of many things that we should be doing to put more capital in the hands of America’s job creators. n
The author is the senior U.S. Senator from Louisiana and chair of the Senate Committee on Small Business and Entrepreneurship.