The SBA’s Recovery Act role
It’s been a little more than four months since President Obama signed the American Recovery and Reinvestment Act. In that time, the U.S. Small Business Administration has implemented new programs to get credit flowing again and has several more on the way that will help small businesses weather this economic storm, and ultimately continue to grow and create jobs.
First and foremost, we enhanced our top two loan programs – 7(a) and 504 – which have so far resulted in $4.3 billion in new loans for small businesses. The SBA temporarily eliminated fees for borrowers on its 7(a) loans and for both borrowers and lenders on its 504 loans. The SBA also temporarily raised the guarantee on most of its 7(a) loans to as much as 90 percent, up from 75 to 85 percent. In this short time, there has been a 30 percent increase in average weekly loan dollar volume compared to the weekly average before the passage of the Recovery Act.
Lenders have responded positively to these program changes. This recovery capital is flowing to a broad base of small businesses: 25 percent to rural; 21 percent to minority-owned; 19 percent to women-owned; and 9 percent to veteran-owned.
The New Hampshire SBA office reports that the fee reduction/elimination provisions on SBA loans for the four-month period from the signing of the Recovery Act on February 17 to June 18 have resulted in more than $607,641.85 in savings for small-business borrowers in New Hampshire. Small businesses saved between $243 on a $13,500 loan all the way up to $25,515 on an $810,000 loan.
Last month, SBA launched the America’s Recovery Capital – ARC – loan program. The ARC loans will provide a “bridge” for many small businesses to the better economic times ahead. This program provides loans of up to $35,000 to viable but struggling small businesses to help them make debt payments. ARC loans are interest-free to the borrower, deferred repayment loans, which are 100 percent guaranteed by the SBA. The SBA makes the interest payments to the bank.
With the launch of ARC loans, SBA has now put in place programs implementing 88 percent of the $730 million provided to the agency by the Recovery Act.
In addition to the Recovery Act, we have expanded eligibility of our 7(a) program with an alternate size standard, which makes more than 70,000 small businesses newly eligible for SBA support. Also, rolled out a pilot program for dealer floor plan financing on July 1. And in the coming weeks, we will announce other Recovery Act programs, including an expansion of our microloan program, a loan that uses the 504 loan program to refinance debt, and a guarantee program to stimulate sales of 504 first mortgage pools in the secondary market.
America’s small businesses are the key to our nation’s economic recovery. The SBA is using every tool in our toolbox – and creating new ones when necessary – to help small businesses lead us out of these tough economic times.
Witmer H. Jones is New Hampshire district director of the U.S. Small Business Administration.