The problem, he complains, is the SBA's strict limit of $2 million in hotel loans, a total that hasn't changed in years. “It would be nice if SBA raised that limit. I guess that small business is meant to be really small,” he says.

Signs of securitization life

Most casual observers of the commercial real estate market may not realize it, but loan securitization hasn't gone away entirely. Banks and other lenders are able to take the SBA-insured portion of their portfolios and sell it into the aftermarket to raise capital.

Lenders like PMC Commercial Trust, a direct-lender real estate investment trust based in Dallas, are doing that with loans arranged through the SBA's 7(a) program.

“The rates are so low on those 7(a) loans that they aren't real attractive, but there is a market for them,” says Laurie Ivy, PMC's senior vice-president of marketing. “We are doing very little conventional lending now, but we are doing 7(a) loans.”

Even with the SBA lifeline, PMC is scaling back. The company laid off 25% of its staff a few months ago. As recently as two years ago some 90% of the company's lending was to hotels. That share has shrunk to 50% as PMC has widened its scope to encompass restaurants, retail stores, and even gas stations.

“Two years ago just 20% of our loans were guaranteed by the SBA. Today 95% are SBA-insured,” says Ivy. “Without SBA we might be out of money to lend today.”

H. Lee Murphy is a Chicago-based writer.

See also: Tips for borrowers in securing an SBA loan

SBA LENDERS PUT OUT THE WELCOME SIGN

While many lenders have stopped making loans, the SBA is overseeing a robust book of business. Still, the dollar volume of SBA loans dropped 11% from 2007 to 2008.