It may take years for us to truly understand what is included in the recently passed economic stimulus legislation, but for now, these points are worth noting.
The bill provides $730 million to the U.S. Small Business Administration 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.
SBA lending declined last year, and the decline has continued into 2009. A tightened credit market has had an impact on entrepreneurs throughout the country. Many are uncertain about taking on additional debt. The stimulus bill, at least in SBA’s view, addresses many of these issues. It gives Small Business Investment Companies better leverage to reach more companies. The bill also allows SBA to raise its loan guarantee from the current levels to as much as 90 percent for some loans in contrast to the current 85 percent cap on loans up to $150,000 and up to 75 percent on loans greater than $150,000.
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 be 100 percent guaranteed by SBA. Repayment would not have to begin until 12 months after the loan is fully disbursed. The bill provides $255 million for this new program. 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, such as that provided by the Small Business and Technology Development Centers, to start-up, newly established or growing small businesses. The bill provides funding to increase loans from SBA to participating Microlenders by $50 million through September 30, 2010, and adds $24 million in grants to provide technical assistance to borrowers.
The bill also gives SBA 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.
For companies working in government contracting, the bill raises the maximum contract amount that can be covered by an SBA guaranteed surety bond from $2 million to $5 million, and, under certain circumstances, for contracts amounting to $10 million, and provides additional funds to cover the costs of expanding this program.
More information on all of this will be forthcoming when SBA has time to adjust its policies and procedures.