More small business owners can expect more help from the U.S. Small Business Administration (SBA) in dealing with the credit crunch and business turndown, as part of the recently-passed American Recovery and Reinvestment Act, according to the SBA.
A package of loan fee reductions, higher loan guarantees, secondary market incentives and enhancements to existing SBA programs all are intended to help unlock credit markets and directly aid the small business sector.
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 Daryl K. Hairston, acting SBA administrator.
The act includes some $730 billion for the SBA to make changes to its lending and investment programs so that it can reach more small businesses that need help, according to the SBA. The funding includes:
$375 million for temporary fee reductions or eliminations on SBA loans and increased SBA guaranteed shares, up to 90% for certain loans
$255 million for a new loan program to help small businesses meet existing debt payments
$30 million for expanding SBA's micro loan program, enough to finance up to $50 million in new lending and $24 million in technical assistance grants to micro lenders
$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, the SBA explained.
The Act gives the SBA specific tools to make it easier and less expensive for small businesses to get loans and gives lenders more incentives to make loans, Hairston said. More details on implementation of these programs will be coming in the next few weeks, he added.
Highlights of the Act as related to the SBA include:
90% Guarantee SBA is allowed to raise its loan guarantee from current levels up to as much as 90% for some loans.
Business Stabilization Loans A new $225 million loan program will 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 be 100% guaranteed by SBA. Repayment would not have to begin until 12 months after the loan is fully disbursed. These loans will help ensure that small businesses have time to re-focus their business plans in order to succeed in the long run.
Micro Loans The SBA micro loan program, which provides small loans (up to $35,000) paired with technical assistance to start-up, newly established or growing small businesses, will be expanded.
Refinancing SBA now has the power to use the 504 Certified Development Company program to refinance existing loans for fixed assets, providing fresh support for small business expansion. This change will help business owners expand their current development projects and create jobs in their communities.
Secondary Market Expansion SBA is authorized to establish a secondary market for pools of “first lien” loans under the 504 program, to provide liquidity and encourage lenders to continue participating in the 504 program. These “first lien” loans from commercial lenders currently have no SBA guarantee.