Role of the SBA in the American Recovery and Reinvestment Act

On February 17, 2009, President Obama signed into law the $787 billion American Recovery and Investment Act also known as the economic stimulus package. While it will take awhile to fully understand the impact this legislation will have on small businesses here is what we know is in the bill relating to the Small Business Administration (SBA):

The bill provides $730 million to the SBA for changes to the funding and investment programs:

* $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

* $10 million for the Office of Inspector General

* The bill also authorizes refinancing for certain SBA loans so borrowers can expand their businesses on favorable terms

If nothing else there seems to be a concerted effort here to allow small businesses some breathing room to deal with effects of the economic collapse on their operations. The question, of course, is how will this change the way that banks look at small business loans. One key to remember is that the SBA typically does not make direct loans. They will provide a guarantee on commercial bank loans so the banks need to step up and lend. Will this be enough to get the banks to loosen the underwriting standards that were tightened to the point of cutting off credit to small business? This remains to be seen but at least it is a good start.

Click 09-10 SBA-Stimulus Bill.doc to see the full press release from the SBA on the Stimulus package.

Source: http://sbdcfreeadvice.ning.com/profiles/blogs/role-of-the-sba-in-the

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