President Obama on Friday said he wants to expand Small Business Administration (SBA) guarantees to commercial real estate loans.
The administration is asking Congress to allow owner-occupied commercial real estate loans maturing in the next year to be refinanced through the SBA's 504 program. That program currently cannot be used to refinance maturing debt.
The president also proposed increasing the cap for SBA Express loans, which carry a 50% government guarantee, to $1 million from $350,000.
"Even companies with great credit histories are facing challenges refinancing at what are historically low rates," Obama said during a speech in Maryland. "Property values have fallen and lending has dropped. As a result, many businesses that would otherwise survive this downturn are at risk of defaulting, which in turn will lead to even lower property values and less lending."
Under the proposal, existing lenders would refinance up to 70% of the current property value and the SBA would finance the balance.
When new lenders do the refinancing, the SBA would finance even more, up to 40%.
The administration said nearly $19 billion of commercial real estate loans could be refinanced each year.
"Many of these commercial mortgages are coming due over this year, next year and the year after and as they come due banks don't have an appetite for commercial mortgage refinancing even if the owner has never missed a payment and occupies that building," SBA Administrator Karen Mills in a conference call with reporters Friday.
These programs come on the heels of others the administration has designed to free up credit for small businesses, including a plan to extend $30 billion in capital to community banks to lend to small businesses.
Mills acknowledged the gap between the administration's push for small-business lending and criticism by examiners who believe banks are taking on too much risk.