Wednesday, December 30, 2009

Cobra Subsidy/CEA Weekly Update

The California Employers Association is a member of SB Cal. I thought this information may be useful to you.

On December 21, 2009 the President signed the Department of Defense Appropriations Act for Fiscal Year 2010 (“Defense Act”) extending the COBRA subsidy.

The legislation extends both the period of eligibility and the length of the subsidy. The amount of the subsidy remains at 65%. It also provides for a retroactive application of the subsidy extension and includes additional notice requirements that employers must grapple with early in the new year.

Maximum Length of Subsidy:

ARRA COBRA Subsidy: 9 months
Defense Act COBRA Subsidy Extension: 15 months

Period During Which Involuntary Termination of Employmnet Must Occur:
ARRA COBRA Subsidy: Sept. 1, 2008 to Dec. 21, 2009
Defense Act COBRA Subsidy Extension: Sept. 1, 2008 to Feb. 28, 2010

Subsidy Percentage:
ARRA COBRA Subsidy: 65%
Defense Act COBRA Subsidy Extension: 65%

Eligibility Period Extended

The current COBRA subsidy program under the American Recovery and Reinvestment Act (ARRA) provides a nine-month subsidy for COBRA continuation coverage to individuals who are involuntarily terminated from employment AND lose coverage as a result of that termination on or after September 1, 2008 through December 31, 2009. Under the Defense Act, a 15-month subsidy for COBRA continuation coverage will be available to individuals who are involuntarily terminated from employment on or after September 1, 2008 through February 28, 2010 and are eligible for COBRA coverage related to the involuntary termination.

Thus, under the Defense Act, only the termination from employment, not the loss of coverage, must occur on or before February 28, 2010. For example, an individual who is involuntarily terminated on February 2, 2010 and has employer-provided coverage through the end of February will be eligible for the subsidy even though the loss of coverage does not occur until March 2010—after the expiration of the eligibility period. This nuanced change is meant to take care of a concern that we had addressed in the last One Minute Memo that employees who would have lost coverage on January 1, 2010 due to a December involuntary termination would not have been eligible for the ARRA COBRA subsidy.

Subsidy Extension is Retroactive

The Defense Act provides for the retroactive application of the subsidy extension. Any individual who previously had the federal COBRA subsidy but exhausted it after nine months will have an opportunity to have COBRA coverage at the subsidized rate for an additional six months. (The law does not extend the maximum period of COBRA continuation coverage that is otherwise required by COBRA.) If an individual continued on COBRA by paying the full COBRA premium after exhausting the nine-month subsidy, the excess premium amount paid must be refunded or credited to the individual. If the individual terminated his or her COBRA coverage after the nine-month subsidy period was exhausted, the individual will have the chance to restart COBRA at the subsidized rate retroactive to when he or she stopped paying for COBRA. To continue their coverage they must pay 35% of premium costs by February 19, 2010 or, if later, 30 days after notice of the extension is provided by their plan administrator.

New Notice Requirements

Under the notice provisions included in the Defense Act, any individual who was eligible for the ARRA COBRA subsidy on or after October 31, 2009, or who is voluntarily or involuntarily terminated on or after that date, must be provided a notice with information regarding the subsidy extension. This notice must be provided no later than February 19, 2010. (Notices to those who become eligible for the COBRA subsidy after December 21, 2009 must be given in accordance with the timing under general notification rules of COBRA.)

In addition, any individual who was eligible for the ARRA COBRA subsidy, but either was dropped from coverage for failure to pay a COBRA premium or who paid the full COBRA premium after they exhausted their ARRA COBRA subsidy, must be provided with information regarding the Defense Act extension and the right to make retroactive premium payments at the federally subsidized rate. This notice must also be provided by February 19, 2010.

In order to avoid issuing a refund or applying a credit, employers may want to promptly notify those individuals whose subsidy expired but who still have the chance to pay their COBRA premiums for November and/or December of the extension so that they may continue COBRA on the reduced premium basis. The government is expected to develop model notices for use by employers as it did for the ARRA COBRA subsidy earlier in 2009.

Finally, COBRA may be extended yet again in 2010. An extension to June 30, 2010 has been proposed in the Jobs for Main Street Act, 2010, which is currently being debated in Congress.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

Cobra Subsidy/CEA Weekly Update

The California Employers Association is a member of SB Cal. I thought this information may be useful to you.

Please use this link to view the California Employers Association (CEA) Employer's Update article on Cobra Subsidy:

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116
Marty Keller, the Governors Small Business Advocate, has called a meeting of small business leaders January 5th. The purpose of the meeting is to discuss “specific ways that the state of California can support our small businesses”.

He has asked that we provide him any thoughts we might have prior to the meeting. Please give me your thoughts.

Also I would be interested in how your business is doing. Please let me know the industry you are in and whether you are optimistic or pessimistic for 2010? Will you be hiring in 2010 or reducing your staff?

Small Business California will be sending out its annual survey next month. Please let me know if you would be willing to help us circulate this. To see our past surveys go to our website

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

Health Reform - The Action Moves to Conference

I hope you are enjoying the Holidays.

I am on the Board of the Pacific Business Group on Health. While the organization is made up of larger companies they do some terrific work around trying to reduce health care cost and impacting the recently passed House and Senate bills. I believe that on these issues big business and small business are aligned.

This is clearly much longer than most emails I send but I think small businesses must understand these important issues and as we talk to Congress members reinforce the importance of these reforms.

Small Business California has joined PBGH in their efforts. I welcome your comments.

Have a wonderful New Year. 2010 is the year I will see my 11 year dream come true that being a Volunteer in Medicine Clinic in SF.The clinic will be called Clinic By the Bay and will open in the summer of 2010. Thank you to all that have contributed to the Clinic.Small Business California has been an important part in making this happen and it is an example of small business looking to find solutions to helping the working uninsured get health care.

Small Business California looks forward to working with all of you in 2010 in getting the voice of small business heard in Sacramento and Washington.

PBGH Board & Colleagues:

With the passage today of the Senate health reform bill, the action now moves to forthcoming conference committee effort to merge the House and Senate provisions. As you know, the “devil’s in the details” – but the details also have the prospect of including many “angel” concepts that are crucial to building a platform for creating a more effective delivery system in the years to come. In the coming weeks, you will be seeing mountains of analysis and reviews of the major issues. What follow is a quick list of two types of issues: first major delivery reform issues (where PBGH has been focusing its efforts on your behalf), and second the major issues relating to the “big ticket” employer and coverage issues.

Delivery Reform: after lots of work in the House and the Senate the prospects of “bending the curve” (for both the federal government and the private sector) and promoting better quality are real. However, there are two big “ifs.”

First, the Senate and the House have different elements, with different “strengths.” Of note, many of the Senate delivery reform provisions were added directly in response to the efforts of PBGH and others to make proposals more robust. If, however, we end up with the lowest common denominator – we will be in VERY bad shape. PBGH has organized other employer groups along with labor and consumers, to push for the strongest final reform package. We have already provided our recommendations to the White House, Senate and the House (see Recommendations sent December 21, 2009 at

ACTION OPPORTUNITY: We will be updating this document and resending to policy-makers the first week of January. PBGH members are invited to join as endorsers and to encourage other state or national groups to which you belong to also join this effort. If interested, contact Peter Lee at

Second, if legislation passes – the “devil” will be in how a huge array of programs is implemented. PBGH and other groups will need to be engaged, vigilant and dogged in assuring that the myriad programs enacted are actually implemented with an eye to meeting the needs of patients and purchasers.

There are many delivery reform issues in play (see the Recommendations noted above for details), but the big issues – many of which are already garnering huge pushback from providers – include:

Establishing an Independent Payment Advisory Board. Originally framed as the “Independent Medicare Advisory Board,” this entity proposed in the Senate would be empowered to make recommendations regarding both Medicare AND actions that could reduce costs and improve quality in the private sector. As proposed, some of its recommendations would be required to receive “fast-track” consideration by Congress – though these fast-tracked recommendations could not affect hospitals and hospices until 2020 (which have other cost cutting provisions in the bill). Through our work, the Board is called on to issue annual reports on quality and cost trends in Medicare and the private sector.

Speeding Up and Improving Payment Reforms. Many steps are geared to speed up payment reforms by Medicare and encourage those efforts to align with private payers.

Robust Comparative Effectiveness Research Enterprise. It is critical that there be a well funded and truly independent process to assess what treatments and interventions work. Just as important, the results of that research need to be used to improve care.

Effective Measurement and Public Reporting. A broad coalition of groups, Stand for Quality, that PBGH helped organize is pushing for priority setting, developing measures and data collection. There continues to be substantial pushback by providers in the area of public reporting.

Release of Medicare Data. One of the big last-minute successes on the Senate process was to add a provision to release Medicare data for use in developing performance reports on providers. This is HUGE and is the focus of huge pushback from providers.

Reform Issues In Play: There are major issues in play that could have dramatic impacts on employers, consumers and providers. While the conventional wisdom is that on average Senate provisions will “win-out” is likely correct…it is also correct, that you can easily drown in a lake that is “on average” only 2 inches deep. There will definitely be some “wins” for the House. While PBGH has and will continue to focus its attention on the delivery reform issues discussed above, what follows – building on the request at the PBGH Board meeting – is a quick reference grid of some of the big issues. I’m NOT, however, giving any predictions on how these issues will pan out.
For a good detailed side-by-side of the major elements of reform see Kaiser Family Foundation,
For a good review of major issues specific to employers see some good work done by the HR Policy Association.

ACTION OPPORTUNITY: PBGH members are encouraged to advocate on these issues – the White House and Congress needs to hear from those who pay for and receive care (they’ll be hearing loud and clear from the providers and suppliers whose incomes are at stake).

The House and Senate have in common broad provisions that will dramatically change how health care is covered and paid for. Without going in the details, those provisions include:

Individual Mandate – require individuals to have “acceptable” coverage (ISSUE: if the penalty is small, there could be risk selection as healthy individuals opt-out until they need coverage)

Employer Mandate – require employers to provide coverage or pay a penalty (ISSUES: what constitutes acceptable coverage could raise big issues for employers, dependent coverage requirements, part-time and seasonal employees)

Expansion of Public Programs – there will be large expansions of Medicaid (ISSUE: since states pay a portion of Medicaid, the size of the expansion will have big implications for state budgets over time)

Subsidies for Individuals and Employers – there will be subsidies for individuals through “Exchange” and to small businesses in the form of tax credits; for large employers through a temporary reinsurance program (ISSUE: for large employers there is the potential of some employees “opting in” to get coverage through the Exchange – which could have major risk selection implications)

Insurance Underwriting and Coverage Rules – guaranteed issue (no screening for pre-existing conditions), no lifetime caps; many consumer protections; maybe caps on non-health care spending

Exchanges to Offer Coverage – State (and in the House version a National) Exchanges will offer plans for individuals and employees of small business (ISSUES: there are many issues regarding how plans in Exchanges operate, plan designs and aligning with other efforts to promote delivery reform)
Defined “Essential Benefits” – all plans must offer “essential benefits,” including coverage of preventive services (House defines as 70% of actuarial value of covered benefits; Senate 60%) (ISSUE: what is on the list and what the actuarial value are have huge implications for all employers and consumers)

Cafeteria Plans – Caps FSA contributions at $2,500 and excludes OTC medications without a doctor’s prescription under FSAs, HRAs and HSAs. Penalties on non-medical HSA distributions increased to 20%

Paying for Expansion – both House and Senate reduce Medicare Advantage payments significantly

Promoting Wellness – national strategies to promote health and wellness

Fair Share from Pharma – there is lots of pressure on pharma to “kick in” more to reform than hand-shake deal of $80 billion over ten years (this SHOULD happen – with closing of donut hole and coverage expansion, pharma has plenty of room to support lowering costs)

What follow are some of the provisions in the House or Senate provisions that are particularly important from an employer perspective AND are very much in-play.

Paying for Expansion:

Tax on high income individuals
Limits contributions to FSAs and scope of HSAs

Tax on "Cadillac Plans" (BIG employer issue - depending on how structured could affect many benefit offerings in out years)
Fees on RX, medical devices, health insurance - will all be passed on to employers and employees

Employer Mandate:

"Pure" pay-or-play mandate with minimum contribution for full and part-time (OR pay 8% of payroll penalty)

Penalty only when coverage for full-time employee does not hit 60% actuarial value

Exchange & Employee "Opt Out" of Employer Coverage


Provision requires some employers (where the ee's contributions to the plan is very high) to be given voucher to buy in Exchange. Few employees likely affected, but sets precedent and has potential of adverse selection.

Wellness Provisions:

Grant program for small and mid-sized employers, BUT participating employers must offer the programs to all employers and cannot mandate participation or use participation as a condition to receive any financial incentive.

Increase incentive limit to 30% of total premium
Secretary of HHS would have the authority to issue regulations allowing financial incentives up to 50%

Retiree Lock-In:

Prohibits any post-retirement reductions in benefits for retirees unless same reduction done for actives

PBGH continues to “keep our eyes on the prize” of delivery system re-engineering and payment reform that truly moderate health cost trends.

Feel free to contact me if you have questions or comments. AND…best wishes for the holidays.

Peter V. Lee
Executive Director,
National Health Policy
Pacific Business Group on Health
221 Main Street, Suite 1500
San Francisco, CA 94105
Phone: 415-615-6368

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

7a and 504 Loans

The President has sign the Department of Defense bill that allocates $125 million to continue the increased guarantees on 7a and 504 loans and waives the fees.

For anyone that had a loan funded after the stimulus money ran out but before this additional stimulus you will not have your fees reimbursed. This will start December 28th so if any of you have funding that may come before December 28 I suggest you wait.

As I have indicated we have more work to do to pass HR 4302 which will extend funding for the fiscal year.

I have 20 associations ready to sign a letter to California House members but I need your help. If you know a House member and work with them please let me know. I can help you approach them to see if we can get them to cosponsor as we did with Senators Boxer and Feinstein.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

Energy Grant/Volunteers in Medicine

Small Business California has received a grant from the Energy Foundation to develop a newsletter called Building Stronger Chambers. This newsletter identifies Chambers around the state that have identified funds and assistance for members from utilities, water agencies and air districts.

If you are part of a local Chamber that has also been working on this please let me know. Could you also let me know if your local Chamber would like to receive this newsletter. See newsletter below.

I am pleased to report that the National Association of Government Guaranteed Lenders is celebrating its 25th anniversary and in honor of this and in recognition of the efforts of Biff Bernhard, one of the Founders on NAGGL and myself as a small business advocate has donated $2500 to my Volunteers In Medicine clinic in SF Clinic By the Bay. NAGGL has been a great advocate for small business over these 25 years and I am honored that they chose to recognize Clinic By the Bay in celebrating their success.

C of C GreenSheet

Building Stronger Chambers One Sustainable Step At A Time

What is this ?

"Building Stronger Chambers" means chambers of commerce inCalifornia successfully identifying funds and assistance for members from utilities, water agencies and air districts so members can save money on energy and water use and take advantage of financial incentives for transportation alternatives. "Stronger Chambers" attract new chamber members successfully making money as green entrepreneurs.The C of C GreenSheet is about and written by local California chamber of commerce organizations and members. The aim, with your help if you are willing to forward this to your colleagues, is to distribute the C of C GreenSheet to all CA chambers of commerce sharing these success stories and attracting stronger members for all chamber organizations.

The GreenSheet is edited by Hank Ryan serving on behalf of Small Business California. Please email or call (510-459-9683) with stories and suggestions.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116
It now appears with Senator Nelsons supporting the Senate bill that we will have a health bill passed and signed by the President.

What is not being discussed is that SF has a Healthy SF Ordinance in place where employers with 20 or more employees have to either provide insurance or buy into the City plan or set up something else to meet the City requirements.

SF government has been very clear that their City plan is not insurance so if it is not are employers who pay into the City plan also subject to the Senates requirement to pay $750 to the Federal government and meet the Citys requirements.

Scott Hauge
Small Business California
2311 Taraval Street
San Franisco, CA 94116

Money for SBA Loans

See story below.

This bill includes money to continue the 90% guarantee on 7a and 504 SBA loans and the waiver of fees on these loans. The Senate passed the bill earlier so we just need the Presidents signature.

As you will recall the stimulus money ran out in November and SBA loans immediately dropped like a rock.The additional money should be enough to cover SBA small business loans until February and between now and then we hope to pass S2869 in the Senate and 4203 in the House for funding through the fiscal year.

Senators Feinstein and Boxer are coauthoring the Senate bill due in large part to SB Cal efforts and 13 Associations including the National Association of Government Guaranteed Lenders, the National Small Business Association and our affiliate members CALTEL,Plumbing Heating and Cooling Contractors of California and our soon to be affiliate member the Northern California Retail Booksellers Association. We also received significant help from Jim Baird owner of Bay Area Development.

We will start looking for cosponsors in the House and have 20 associations that will be signing the letter we will be writing. If you have a relationship with a House member please let me know and I will forward to you our letter.

Saturday, December 19, 2009

Senate Approves Defense Bill, Moves Ahead on Health Care

December 19, 2009, 8:33 A.M.

The Senate voted 88-10 in favor of a $636 billion Defense appropriations bill early Saturday morning, clearing the way for consideration of a final health care measure that Democratic sources say is on pace to pass before Christmas Day. Full Story

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

San Francisco Budget Deficit

You all have read about the SF budget deficit projected for next year. Here are some revenue raisers being considered for the November 2010 ballot.

$616 million Earthquake Safety Bond
Gross Receipts Tax (straight or hybrid)
Utility Users Tax (both increase to commercial and new residential)
Sales Tax increase
Hotel Tax increase
Parcel Taxes (with higher rates for commercial properties)
“Congestion Charge” for vehicles
Local Vehicle License fee
Condo Conversion expedition fee
Taxi-Cab medallion fee
Alcohol Fee/Tax
Soda Fee/Tax
Medical Marijuana Tax
Income Tax

Scott Hauge
President Small Business California
2311 Taraval Street San Francisco, CA 94116


S2869 is the bill we have been working so hard to get passed. Note it passed today and Senators Feinstein and Boxer were coauthors. See below

House representative Abercrombie has a similar bill in the house and we are very hopeful this gets passed this year.

For those of you involved in the International market note the passage of S2862.

December 17, 2009
Contact Information:
Vicki Ekstrom (Landrieu)
Matther Berger (Snowe)


Bills to increase loan limits and improve international trade head to the Senate floor.

WASHINGTON – The United States Senate Committee on Small Business and Entrepreneurship today passed two bills to increase access to capital for small businesses and enhance small business trade opportunities.

S. 2869, the “Small Business Job Creation and Access to Capital Act of 2009,” includes provisions to increase Small Business Administration (SBA) loan limits and extend government guarantees and fee eliminations enacted in the American Recovery and Reinvestment Act earlier this year. S. 2862, the “Small Business Export Enhancement and International Trade Act” will ensure small businesses have access to the resources and tools needed to explore new export opportunities in emerging markets or expand their current export business.

“By increasing the loan limits, small businesses across the country have greater access to credit. The SBA estimates that these limits will increase small business lending by $5 billion next year and will be budget neutral over time,” Chair Landrieu said. “America’s 29 million small businesses are really struggling with skyrocketing health insurance premiums and a tight credit market. Now that we have stabilized Wall Street, it is time to jump-start Main Street, and these bills will do just that.”

“Our most fundamental domestic challenge is to swiftly turn the economic tide and spur employment opportunities for the millions of unemployed and underemployed Americans. And the fastest route to doing just that runs straight through Main Street small businesses in cities and towns all across this nation,” said Ranking Member Snowe. “The bills this Committee passed today will augment credit availability and assist small businesses to market their products overseas, both of which will pay tremendous dividends on the job creation front. I thank Chair Landrieu for her efforts to pass these bipartisan bills in a timely manner, and I look forward to their swift passage by the full Senate.”

S. 2869 contains several critical provisions to bolster SBA assistance to America’s nearly 30 million small businesses and aspiring entrepreneurs. Specifically, the bill would:

Increase the loan limit on 7(a) loans from $2 million to $5 million;
Increase the loan limit on 504 loans from $1.5 million to $5.5 million;
Increase the loan limit on microloans from $35,000 to $50,000 and increase the maximum loan made to a microloan intermediary from $3.5 million to $5 million;
Allow the 504 loan program to refinance short-term commercial real estate debt into, long-term, fixed rate loans;
Extend the authorization to provide 90 percent guarantees on 7(a) loans and fee elimination for borrowers on 7(a) and 504 loans through December 31, 2010; and
Direct the SBA to create a website where small businesses can identify lenders in their communities.

S. 2862 would strengthen and improve support for American entrepreneurs seeking opportunities to expand their business, create new jobs and compete in the international market. The bill would also:

Establish an SBA Associate Administrator for International Trade to carry out the Agency’s international trade programs and formulate its trade and export policy;
Bolster the number of SBA export finance specialists assigned to Export Assistance Centers;
Raise, from $2 million to $5 million, the maximum amount of an International Trade Loan or Export Working Capital Program loan;
Establish in statute an Export Express program and expand the maximum loan size from $250,000 to $500,000; and
Create a State Trade and Export Promotion (STEP) Grant Program to increase the number of small businesses that export and increase the value of the exports by small businesses.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

SBA Loans and Jobs Bill

Great news. The House will be passing 2 bills this week. Department of Defense appropriations will include $125 million for SBA loan programs to continue the stimulus thru February 2010.

They will also pass a Jobs bill that has $354 million to continue stimulus for the balance of the fiscal year.

It appears the Senate will pass the Defense bill by Dec 23 and then the SBA can continue making stimulus loans. The Senate will then pass the Jobs bill when they come back in January.
Small Business California, the National Small Business Association along with the 504 lenders association[NADCO] and the National Association of Government Guaranteed Lenders have been very instrumental in getting this done. We will continue to push the passage of S 2869 which also deals with SBA and would increase the 7a loan size to $5 million.

Speaking of S2869 SB Cal has been working hard to get Senators Boxer and Feinstein to coauthor. We received word yesterday that Senator Boxer has filed the papers to add her to the bill. We have been told by Senator Feinstein’s office that she is looking at this and we anxiously await her response.

Thank you Senator Boxer.

Senator Feinstein has been added as a co-sponsor of S. 2869 (12/16/09)

Yesterday at the request of Small Business California the SF Board of Supervisors passed a resolution asking the Senate and the House to support increased funding for SBA loans. I want to thank the President of the Board David Chiu for introducing this and Regina Dick Endrissi the Executive Director of the Small Business Commission for making this happen.

(December 16, 2009)

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

Healthcare Issues

After a tense meeting December 14, it appears the Dems will drop the Medicare buy in [ 55 to 64 year olds] from the Senate health bill. As you will recall they previously dropped the public plan. This according to the Washington Post and NY Times. If this true it would appear to me that the Senate will have the 60 votes they need to move the bill forward to conference committee. What I don’t know is if the abortion issue is resolved in the Senate and if there will be any resistance from the liberals in the Senate for dropping the public plan and the Medicare buy in.

We continue to push hard for the passage of 2869. See below outline of the bill. I confirmed yesterday that Senator Boxer will become a cosponsor on the bill. SB California will be sending a letter of support on this and will be joined by a coalition of about 10 California small business associations. We are also working with NADCO and the National Association of Government Guaranteed Lenders.

Last night Congressman Abercromie from Hawaii introduced in the House the House version of S 2869 - H.R. 4302.

December 14, 2009
Legislative Update on New Senate Bill S. 2869
Late last week, the leadership of the Senate Small Business Committee, Senator Mary Landrieu (D-La), Chairperson, and Senator Olympia Snowe (R-Me), Ranking Member, introduced the “Small Business Job Creation and Access to Capital Act of 2009”. Committee mark-up for this bill, S. 2869, is scheduled for December 17th. I am writing to ask that you immediately contact your Senate offices asking your Senators to cosponsor this bill. Time is critical and you should make this effort before the close of business on this Wednesday, November 23rd.

As of now, the following Senators have already signed on as co-sponsors:
Senator Byron Dorgan (D-ND)
Senator John Kerry (D-Ma)
Senator Joe Lieberman (I-Ct)
Senator Jeanne Shaheen (D-NH)

Our thanks to these Senators and the Committee leadership for introducing and co-sponsoring this legislation so critical to helping small business borrowers get back to a growth mode by enabling us to provide more long term capital to them. Additionally, our thanks go out to the CDCs that have worked so well in educating both Senators and staff about 504 and its benefits in their states. These efforts will certainly pay off for your borrowers if this bill moves quickly.

The bill addresses several requests made recently by President Obama (including authorizing the extension of the 504 stimulus provisions through calendar 2010) to substantially expand access to capital for small businesses. NADCO Leadership strongly supports the bill.

To further explain, as many of you know, funds for offset of the bank and CDC processing fees that were provided by the February stimulus bill have been exhausted. This bill authorizes extension of these fee offsets if Congress APPROPRIATES funds for the programs. NADCO continues to support all efforts to get Congress to provide new funds for these fees, but this is still being discussed by the key Congressional leadership and is not assured at this time. We encourage you to discuss the need for additional funding to offset these fees with your Members of Congress, and ask them to request this from the Appropriations Committees.

The many benefits for the loan programs and for small businesses of S. 2869 include:


l. Loan size increases - - - permanent 504 loan maximum increases were provided as follows:

Regular and public policy goal loans would be increased to $5 million;

Small manufacturer loans would be increased to $5.5 million; and

Energy loans would be increased to $5.5 million.

2. Fee reductions - - - both 504 and 7(a) fee reductions would be authorized through December 31, 2010 (current authorizations are sunset September 30, 2010).

3. Alternative size standard - - - an interim size standard of $15 million net worth and $5 million net income would be provided for both 504 and 7(a) loan applicants until such time as SBA establishes a size standard for both programs based on maximum tangible net worth and average net income.

4. Temporary refinancing - - - authorizes additional financing under 504 for debt refinancing and payment of business expenses. It would be sunset two years after date of enactment and differs from the permanent debt refinancing program created by the stimulus bill this year:

Program cap - - - although part of the regular 504 program and subject to use of its annual program level authorization, it would be limited to a maximum aggregate approval level of $4 billion per year.

Fees - - - in addition to the regular fees, SBA would impose an additional fee if it determines there will be additional cost attributable to refinancing.

Use of proceeds for debt refinancing - - - requires that the debt - - -

1. has been incurred to acquire a fixed asset that is eligible for 504 financing not less than two years before the loan refinancing application
2. is a commercial loan and not subject to a Federal guarantee.

As with the permanent debt refinancing program,

1. the new debt must be collateralized by the fixed assets acquired
2. the borrower must have been current on all payments for at least the past year
3. the existing debt must have been incurred for the benefit of the borrower.

Alternative to jobs test - - - in lieu of the otherwise required jobs test, the eligibility of the borrower may be based on the current jobs in the business times $65,000, with pro-rata credit for part-time jobs.

Loan to value ratio - - - the loan must have a loan to value ratio not exceeding 80%; however, if the collateral appraisal does not satisfy this requirement, the borrower may inject additional cash or other collateral to correct the deficiency.

Use of proceeds for business expenses - - - if there will be debt refinancing, the proceeds may also be used solely for the payment of business expenses, which must be specifically described and the amount itemized.

Additional limitation - - - no part of the loan may be used for non-business purposes.

Use of PCLP - - - the loan may not be approved under PCLP authority.

Borrower loan size - - - the maximum amount of a micro-loan is increased to $50,000.

Intermediary loan size - - - the maximum loan to an intermediary is increased to $5 million.


1. Loan size increase - - - the maximum amount of a 7(a) loan would be increased to $5 million gross; the maximum net guarantee would be increased to $4.5 million until 1-1-2011 when it would be reduced to $3.75 million (in accord with the guarantee %).

2. Loan guarantee percentage - - - the authorization for a maximum loan guarantee would be increased to 90% on loans of all sizes until 1-1-2011 and which time it would revert to the customary 90% on loans up to $150,000 and 75% on larger loans.

(Chris Crawford President/CEO , 703-748-2575,

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

Additional Stimulus Money for SBA Loans

You all know SB Cal is working very hard along with the National Association of Government Guaranteed Lenders to get additional stimulus money for SBA loans.

See below what has happened since money ran out in November.

Loan Volume has fallen back to pre-recovery act levels the last 2 weeks.

Doing a quick chart using the SBA numbers, here is where we are:

Scott Hauge
Small Business California
2311 Taraval Street San Francisco, CA 94116