Converting business-related credit card debt to a more affordable SBA loan sounds like a good deal for your business. It also sounds good to National Small Business United (NSBU), a Washington, DC, advocacy group pushing for new rules allowing just that.
Under current rules, an SBA 7(a) loan can be used to refinance business-related credit card debt only when it benefits the business and if credit card debt is not a result of bad fiscal management. Satisfying a banker of such conditions can be impossible. "Most banks won't mess with this at all," says Alice Magos, an analyst with CCH Inc., a Deerfield, Illinois, provider of business law and finance information and software.
NSBU wants to broaden 7(a) lending rules so more conversions are possible. But with SBA funding already facing the budget axe, any regulatory proposals to expand eligibility face a bleak future. Nevertheless, some consider the prospect of trading credit card debt for a government loan worth fighting for. "This proposal frees up working capital for small business," says NSBU policy analyst David Mack.
For SBA rules to change, organizations like NSBU will need to keep up the lobbying pressure with a little help from entrepreneurs themselves. "Unfortunately, with all that exists, I guess we business owners do need to 'shout loudly,' " says Mark Deion, president of Deion Associates & Strategies, a business development consulting firm in Warwick, Rhode Island. "It appears to be the quickest way to a positive solution, despite the fact that we shouldn't have to shout at all."