SBA Loan Enticements Extended, For Now

SBA Loan Enticements Extended--For NowGood news for small-business owners seeking financing:  The Senate last month voted to temporarily extend funding for two economic stimulus provisions related to Small Business Administration (SBA)-guaranteed loans.

The provisions waived fees that the SBA typically charges banks making the loans, and increased federal guarantees on the loans to 90 percent, compared to the normal guarantee levels of 75 percent. However, as of late November, both provisions had run out of funding.

“Small businesses have been left in limbo since the funding ran out,” Mary Landrieu (D-LA), one of the senators behind the extension (and the chair of the Senate Committee on Entrepreneurship & Small Business, told the Wall Street Journal. “[The legislation] will provide a lifeline to small businesses in need of credit.”

The legislation extends the provisions only through February 2010; however, the Jobs for Main Street Act, which passed in the House last December, would extend both provisions through September 2010. The Senate will soon consider the Act.

Originally instituted in February 2009 as part of the Recovery Act, the provisions have been credited with boosting small-business lending since they took effect. SBA Administrator Karen Mills has reported that the lower fees and higher guarantees have already brought more than 1,200 lenders back to SBA loan programs and spurred some $16.5 billion in small-business lending.

When the SBA announced in mid-November that funds were running out, SBA lenders received a flood of loan applications, creating a waiting list of over 1,000 small businesses requesting more than $530 million in loans. SBA spokeswoman Hayley Matz says extending the provisions would most likely move all of those businesses off the waiting list.

Tony Wilkinson, president of the National Association of Government Guaranteed Lenders in Stillwater, Oklahoma, says the SBA loan programs are more important than ever in today’s tough lending environment. “The conventional credit market will not near normal until sometime in 2011 because the typical small-business will walk in with negative trends on his financial statement,” Wilkinson says. “That’s why the SBA programs are important, because lenders can say, ‘Hey, this is a survivor who will probably make it.'”

The SBA’s first fiscal quarter of 2010 ended in December; at that time, the agency said the volume of SBA-guaranteed loans has increased for the past three months.


Rieva Lesonsky Rieva Lesonsky is a Columnist for Small Business Trends covering employment, retail trends and women in business. She is CEO of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Visit her blog, SmallBizDaily, to get the scoop on business trends and free TrendCast reports.

12 Reactions
  1. Rieva,

    Thank you for the update. One question that I still don’t seem to be getting an answer on is this:

    Are start-up franchise getting the help they need from the SBA, too?

    The Franchise King

  2. While I appreciate the government’s efforts, I believe small businesses will be better served by becoming cash flow positive and self-financing. The government is digging itself into a huge financial hole as they spend money they don’t have and go further and further in debt. If you think of the federal government as a business you’ll acknowledge they’re in very bad financial shape and one day it will catch up with all of us.

  3. Small businesses don’t need more debt, they need more customers. Therefore, I don’t see how this is going to help them – perhaps a few.

  4. Concepcion Hurley

    A long-time friend of mine approached me three years ago with a business plan that he believed would really make a kill but the huge impediment was capital. We approached a local bank that approved our loan application and now the business has grown phenomenally.

  5. Christian Coppes

    need a loan with a poor credit? any advise?

  6. I def agree with Robert, government aid is not the best way to stimulate the economy. First of all, the economy becomes more controlled, similar to USSR, and free-market laws are not acting any more. Small biz’s def need to ensure they can survive on their own.

  7. I get a bit scepitcal with the the link to the Wall Street Journal. Anyone else?

  8. Due to the state of the economy perhaps another extension will be necessary.