What happened when the SBA ran out of small-business real estate loan money

For the first time in its history, the U.S. Small Business Administration ran out of money to lend for real estate and equipment acquisitions.

The funds in the 504 program were exhausted as of Sept. 7 for the 2020–2021 fiscal year, the SBA reported. Funding was restored at the beginning of the new fiscal year Oct. 1.

Despite the seemingly short time span, the three-week hiccup proved challenging for top loan provider TMC Financing, out of Oakland.

“We were able to work through it, but we hope it doesn’t happen again,” said TMC Financing founder and President Barbara Morrison, who’s also a Sonoma resident. “It was a blow to the program.”

Morrison’s $10 billion East Bay finance company has assisted hundreds of startups in California, Nevada and Arizona get off their feet due to the efforts of her 74 employees. Last year, TMC Financing obliterated its $300 million goal by securing $400 million in 504 loans, Morrison told the Business Journal.

One such client is the “glamping” firm Shelter Co., based in Rohnert Park. Founder and CEO Kelsey Sheofsky said she’s using the SBA 504 loan to build a camping hotel and pool club where the former J’s Amusements once sat on Neeley Road in Guerneville. The loan amount is undisclosed.

“This (funding) means we can fulfill our project, (so) then we’re not set back any more than what the pandemic has done,” she said.

Loans waiting to be processed at the time the SBA emptied its coffers remained in a cue until the funds were replenished.

With the pandemic posing challenges and opportunities for the business community far and wide, the SBA reports it has managed mounds of applications for various loans that go beyond the Paycheck Protection Program that served as a stopgap for companies enduring shutdowns while keeping employees on their payrolls.

For just its San Francisco District Office, the SBA processed 999 combined 504 and 7(a) business loans in the last fiscal year ending Sept. 30, valued at more than $1 billion. An SBA 7(a) loan is a financial tool in which the federal government guarantees a portion of the amount borrowed.

Susan Wood covers law, cannabis, production, biotech, energy, transportation, agriculture as well as banking and finance. For 25 years, Susan has worked for a variety of publications including the North County Times, now a part of the Union Tribune in San Diego County, along with the Tahoe Daily Tribune and Lake Tahoe News. She graduated from Fullerton College. Reach her at 530-545-8662 or susan.wood@busjrnl.com.