Stimulus Act to Help Small Businesses With Loans

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On Tuesday, February 17, in Denver, President Obama signed the American Recovery and Reinvestment Act of 2009 into law. Importantly for booksellers, the bill, which had been approved by Congress on Friday, February 13, 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.

Additionally, the legislation offers aid to small businesses with existing loans. The stimulus bill authorizes a new SBA loan program to provide deferred-payment loans of up to $35,000 to 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 and repayment would not have to begin until 12 months after the loan is fully disbursed. According to an SBA spokesperson, these loans will help ensure that small businesses have time to refocus their business plans in order to succeed in the long run. The bill also authorizes refinancing for certain SBA loans so borrowers can expand their businesses on favorable terms, and it expands leverage capability for Small Business Investment Companies.

"The tax incentives and credit stimulus elements of the Recovery Act will truly help small business owners affected by the credit crunch, and will provide financing opportunities to help them create new jobs in their communities," said Acting SBA Administrator Darryl K. Hairston in a press statement. "There's a lot to digest in the legislation, and SBA has established teams to tackle a wide variety of policy decisions, system modifications, regulatory changes, legal requirements, and new program launches authorized by the President and Congress."

The bill provides $730 million to SBA and makes changes to the agency's lending and investment programs so that it 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; and,
  • $10 million for the Office of Inspector General.

"We are going to be part of the solution, and this bill gives us specific tools to make it easier and less expensive for small businesses to get loans, give lenders new incentives to make more loans, and help restore healthy SBA secondary markets to boost liquidity," Hairston added, noting also that more details on implementation will be coming over the next few weeks. (Read more about the economic stimulus legislation.) --David Grogan