Wednesday, May 26, 2010

SBA Out of Money For Loan Breaks


The Small Business Administration once again has run out of money for breaks that made its loans less risky for lenders and more affordable for borrowers.

The economic stimulus bill temporarily increased the government guarantee to 90 percent on the SBA’s flagship 7(a) loans and reduced or eliminated fees on 7(a) and 504 loans, which primarily are used for real estate. Congress has extended these enhancements four times, but the SBA announced Wednesday that it has exhausted all of the funds provided in the most recent extension.

As a result, the agency has reactivated its waiting list for borrowers who want to receive the higher guarantee and reduced fees when — and if — Congress provides funds for another extension. Pending legislation would extend these breaks through the end of the year, but it is not clear whether this bill will be enacted before Congress leaves for its weeklong Memorial Day break.

Until Congress acts, small businesses seeking SBA loans can either place their applications in a queue to wait for additional funding, or take a loan without the higher government guarantee or reduced fees.

The higher guarantee and reduced fees “engineered a significant turnaround in SBA lending and have been successful in helping jumpstart our economy for small businesses,” SBA Administrator Karen Mills said.

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