Economic Perspectives with Hopeton Hay on KAZI 88.7 FM in Austin, TX

Stimulus Bill Enhances Small Business Lending Through SBA Funding

Posted by Hopeton on February 18, 2009

The American Recovery and Reinvestment Act contains a package of loan fee reductions, higher guarantees, new SBA programs, secondary market incentives, and enhancements to current SBA programs that will help unlock credit markets and begin economic recovery for the nation’s small business sector.

“The tax incentives and credit stimulus elements of the Recovery Act will truly help small business owners affected by the credit crunch, and will provide financing opportunities to help them create new jobs in their communities,” said Acting SBA Administrator Darryl K. Hairston. “There’s a lot to digest in the legislation, and SBA has established teams to tackle a wide variety of policy decisions, system modifications, regulatory changes, legal requirements, and new program launches authorized by the President and Congress,” said Hairston.

 

The bill provides $730 million to SBA and makes changes to the agency’s lending and investment programs so that they can reach more small businesses that need help. The funding includes:

·         $375 million for temporary fee reductions or eliminations on SBA loans and increased SBA guaranteed shares, up to 90 percent for certain loans

·         $255 million for a new loan program to help small businesses meet existing debt payments

·         $30 million for expanding SBA’s Microloan program, enough to finance up to $50 million in new lending and $24 million in technical assistance grants to microlenders

·         $20 million for technology systems to streamline SBA’s lending and oversight processes

·         $15 million for expanding SBA’s Surety Bond Guarantee program

·         $25 million for staffing up to meet demands for new programs

·         $10 million for the Office of Inspector General

 

The bill also authorizes refinancing for certain SBA loans so borrowers can expand their businesses on favorable terms, and expands leverage capability for Small Business Investment Companies.

 

“We are going to be part of the solution, and this bill gives us specific tools to make it easier and less expensive for small businesses to get loans, give lenders new incentives to make more loans, and help restore healthy SBA secondary markets to boost liquidity,” Hairston said, noting also that more details on implementation will be coming over the next few weeks.

 

The stimulus bill takes a comprehensive approach and attacks several problems facing small businesses at once by reducing fees, guaranteeing a greater share of certain loans, expanding capacity in the Microloan program, providing new loans to help small businesses keep their doors open through economic hardship, as well as new mechanisms to help unfreeze the secondary markets for SBA-backed loans.

 

Declines in SBA lending volume last year, which are continuing in FY 2009, reflect problems in the broader credit markets, and present hurdles to small businesses that are seeking credit in the current economy. The financial crisis has created a variety of conditions that impact small businesses, including a lack of liquidity in the banking system, a reluctance of many lenders to extend new loans, tightened credit standards, weaker finances at small businesses, and uncertainty about taking on new debt on the part of many entrepreneurs.

 

The Recovery Act addresses small businesses’ lending problems, and addresses key investment and contracting issues. The bill helps Small Business Investment Companies better leverage investment capital to reach more small companies. The bill also increases the current contract limit for SBA’s Surety Bond Guarantee program, which will help small businesses compete for contracts.

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2 Responses to “Stimulus Bill Enhances Small Business Lending Through SBA Funding”

  1. Debra Anderson said

    I have been working with 4 SBA “Preferred Lenders” during April and the beginning of May without success. No bank seems to want to make an SBA loan. Specifically, I qualify under the Patriot Loan program and have excellent credit. Can someone please help point me in the right direction? So far, SBA in Washington, SBA in my area, and my local Small Business Development Center have admitted off the record that the loans won’t happen. Were is 60 minutes when we need them?

  2. Mike Clough said

    Debra, have you secured your loan yet? As a SCORE counselor in St. Paul, I know that loans of any type to anyone where next to impossible a couple of months ago. But that has now changed and I have seen several loans go through. the key seems to be as follows:

    1. You need an compelling business plan. If there is no plan or it is not thorough and compelling, the loan (whether SBA guaranteed or not) is not going to be approved. See http://www.bestbizpractices.org/2009/05/20/is-a-written-business-plan-really-necessary/.

    2. Banks are specialized. Each has industries they like better than others. It is important to find out what industries a bank specializes in before investing your time. If your business is not in an industry in which they specialize, it will be tougher to get approved if at all.

    3. Don’t be afraid of small community or regional banks. When dealing with these banks there are fewer levels of management to work your way through. But the second rule above, will still apply.

    4. If you haven’t already, it might be a good idea to contact your local SCORE office (http://www.score.org)and secure a counselor that has experience in SBA loans who can assist your efforts. It is a free service so what have you got to lose?

    Good luck!

    http://www.linkedin.com/in/mikeclough

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