SBA Moves Forward on Promise to Help Small Businesses

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This week, the Small Business Administration (SBA) began the process of providing details to small businesses on the ways they can benefit from provisions in the American Recovery and Reinvestment Act of 2009, signed into law by President Obama on February 17. In addition, in his speech to Congress on Tuesday, February 24, the President said his administration would work to provide affordable healthcare and open up credit lines for small businesses.

The American Recovery and Reinvestment Act includes key provisions supporting small businesses, including a package of loan fee reductions and higher guarantees, new and enhanced SBA programs, secondary market incentives, and tax cuts. Though a SBA spokesperson stressed to BTW that it will take time to implement all of the new business provisions, one element of the Recovery Act is in place: new funding for SBA-backed Microlenders across the country.

SBA's Microloan Program provides very small loans to qualifying micro-businesses (typically businesses with fewer than 10 employees) by making funds available to nonprofit, community-based lenders -- called intermediaries -- which, in turn, make loans to eligible micro-borrowers in amounts up to $35,000. Borrowers are also provided with corresponding technical assistance to ensure that the loan proceeds are used effectively. Since this program is already in place, small business owners can now go to a Microlender and apply for a loan. The stimulus bill provides for $50 million in new loans by these Microlenders, plus $24 million to help pay for the technical assistance and training they provide to applicants.

The next items that SBA is likely to tackle are the reduction or elimination of fees charged to borrowers and lenders in the SBA's major loan programs, a spokesperson said. In addition, implementing the new Business Stabilization Loan program will be a priority for SBA. The new program will temporarily allow SBA to fully guarantee "stabilization" loans that cannot exceed $35,000, and to fully subsidize a small business borrower's interest payments on the stabilization loan. A borrower does not have to begin repaying the stabilization loan until 12 months after receiving it, and the loan must be paid in full within five years.

In Tuesday's speech, President Obama stressed his commitment to helping small businesses. "I will do whatever it takes to help the small business that can't pay its workers, or the family that has saved and still can't get a mortgage." He explained that one of the ways in which his administration will help is by "creating a new lending fund that represents the largest effort ever to help provide auto loans, college loans, and small business loans to the consumers and entrepreneurs who keep this economy running."

President Obama also noted the importance of addressing the "crushing cost of healthcare," explaining that soaring healthcare costs are "one of the major reasons why small businesses close their doors and corporations ship jobs overseas."

The President reported that "our recovery plan will invest in electronic health records and new technology that will reduce errors, bring down costs, ensure privacy, and save lives.... And it makes the largest investment ever in preventive care, because that's one of the best ways to keep our people healthy and our costs under control." He added: "[N]early a century after Teddy Roosevelt first called for reform, the cost of our healthcare has weighed down our economy and our conscience long enough. So let there be no doubt: Healthcare reform cannot wait, it must not wait, and it will not wait another year." --David Grogan