SBA Applauds Stimulus Bill, Planning Underway For Broadest, Quickest Small Business Impact
Excerpts from a press release sent by the office of Thomas Francovitch, Anne Arundel County Small Business Development Center (aaedc.org)
WASHINGTON – 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 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.
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 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.
90 Percent Guarantee
The bill allows SBA to raise its loan guarantee from the current levels to as much as 90 percent for some loans. At present, SBA can guarantee loans up to 85 percent on loans up to $150,000, and up to 75 percent on loans greater than $150,000. Increasing the SBA guarantee percentage will encourage lenders to extend more capital to small businesses by increasing the share covered by an SBA guarantee.
Business Stabilization Loans
The bill creates a new SBA loan program to provide deferred-payment loans of up to $35,000 to viable small businesses that need the money to make payments on an existing, qualifying loan for up to six months. These loans will help ensure that small businesses have time to re-focus their business plans in order to succeed in the long run.
The bill expands SBA’s Microloan program, which provides small loans (up to $35,000) paired with technical assistance to start-up, newly established or growing small businesses. Historically, these loans reach low-income individuals, women and minorities in both rural and urban areas. Expanding this program through the stimulus bill will help ensure these entrepreneurs are not left behind in the credit crunch.
Secondary Market Expansion
The bill authorizes SBA to establish a secondary market for pools of “first lien” loans under the 504 program. Providing liquidity for these first mortgages will help encourage lenders to continue participating in SBA’s 504 loan program, which provides a key source of capital for community development and other projects.
The bill also empowers SBA to set up a Secondary Market Lending Authority that would make direct loans to broker-dealers that participate in the secondary market for SBA-guaranteed 7(a) loans. This program may help address some of the issues facing the secondary market for SBA loans and may ultimately help SBA lenders make new loans to borrowers.