Bill Cimino was approved for a $1.6 million loan last year to purchase the property on which his Wilmington, Mass., car dealership sits. The loan was backed by the Small Business Administration and—thanks to the government stimulus program—carried no borrower fees and provided his lender with a substantial guarantee against default.
The loan was scheduled to close at the end of December, to coincide with the end of his lease, but paperwork delays pushed it until February—just as the stimulus money for the program ran out.
Mr. Cimino was faced with a choice: His loan application could be processed quickly without the stimulus perks—costing him $43,000 in fees—or be placed on a waiting list in the event more stimulus funds became available.
Being already two months behind schedule, the latter seemed unwise. "I needed to close the loan," he says.
Three days after Mr. Cimino decided to move forward with the closing, legislation passed to restore the stimulus program, but it was too late to reprocess the loan without the fees.
Lenders have historically issued loans backed by the Small Business Administration as a means to accommodate some of their more-risky Main Street customers because up to 75% of the loan would be reimbursed by the government in the case of default.
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