ARRA funds dry up for SBA loans



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Before it went on its weeklong Memorial Day break, Congress failed to reauthorize special small-business loan programs created under the American Reinvestment and Recovery Act, leaving businesses looking for help in the lurch.Authorization for the U.S. Small Business Administration's 90 percent guarantee on 7(a) loans expired on May 31, and the clock is ticking on the authorization for 504 loan borrower fee waivers, which will expire on Sept. 30 if new funding is not approved.The 7(a) program assists startup and existing small businesses in obtaining financing when they might not be eligible through normal lending channels, while 504 loans provide long-term, fixed-rate financing to acquire fixed assets.While the gap in funding is worrisome, Witmer Jones, SBA district director for New Hampshire, said the SBA is still open for business, it’s just the ARRA-enhanced funding that is undecided."If businesses and their banks need the money right away, they can still apply for the loans at their pre-ARRA 75 percent guarantee level and will have to miss out on the fee waivers," he said.For those who can wait, the SBA has reactivated the Recovery Loan Queue, a type of waiting list.Funds from unused loans go into a pool. Businesses, with their lenders, can apply to get on the waiting list. As funds become available, they can be applied to loans in the recovery queue."If the bank really wants a 90 percent guarantee and fee relief, they can also wait for Congress to extend the programs," said Jones. "And it looks like Congress probably will, based on what I’ve been reading."In the meantime, Jones said he does have some concerns banks will begin to "restrict lending.""There’s only a 15 percent difference between the 90 percent guarantee and the 75 percent guarantee, and it sounds small, but it’s really not," he said. "Being on the hook for 25 percent of a half-million dollar loan is a big difference than just 10 percent." For more information on the SBA’s Recovery Queue, visit sba.gov/recoveryq. – CINDY KIBBE/NEW HAMPSHIRE BUSINESS REVIEW Edit ModuleShow Tags