By JULIA L. ROGERS, AOL SMALL BUSINESS
Many small business owners are still finding that financing is hard to come by, even in an economy that is supposedly recovering slowly but surely. However, according to CNN Money, they will start to see relief when it comes to government-backed loans.
The Small Business Administration’s 7(a) lending program reportedly supported 37% more loans in the quarter ending December 31st, processing 12,393 loans for a total of $3.8 billion, a 37% increase from a year ago, when the country was in the throes of the financial crisis.
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Small businesses are still feeling the effects of the recession, and loans granted by the SBA only make up a very small territory in the small business lending world. The fact that they are resurging means good things could be coming soon. The number of SBA loans that are granted have always been a gauge of banks’ enthusiasm to give credit to startups and burgeoning small businesses. The 7(a) Loan Program and other initiatives guarantee part of the money banks lend to qualifying businesses. The banks are happy to oblige because if the borrower defaults, the government is responsible for re-paying the loan.
Many owners of small businesses have watched with dismay as conditions for large businesses have returned to normal after the Lehman Brothers’ collapse at the end of 2008, while their financial recovery has lagged. Because sales have continued to be down in smaller markets, many banks have not taken interest in making a bet on what they perceive to be dangerous borrowers. This led to a decrease of 4.3% — or $11 billion — in small business lending, according to the National Treasury Department.
The SBA has made several attempts to stimulate growth in the small business sector since early 2009, many of which were not completely successful because they were too popular and left many in the lurch. Last February’s $375 million Recovery Act provided a chance to eliminate fees for small business owners seeking loans and increase the amount by as much as 90%. The money for this program ran out before November, and business owners and banks were put in a Recovery Act Queue, consisting of more than 1,000 loans pending approval, finally satisfied with a second $125 million stimulus package instituted in late December.
Other stimulus loan programs such as America’s Recovery Capital and Reinvestment Act are still going, but have been the victims of complaints that the process of applying the loans are so full of hoop jumping that they have been mostly useless.
Still, the SBA seems to be trying harder to improve its stimulus measures, and plans to provide even more funding in the future. The House of Representatives passed a bill in December that will inject another $354 million into the system. This money will go towards extending waived fees and increasing guarantee amounts for loans. The bill is set to go to the Senate this month.
Despite stimulus plans coming slowly but surely, lending for small businesses is still well behind pre-recession levels. In the last calendar quarter of 2007, the Small Business Administration was responsible for more than 20,000 small business loans. Economic experts and SBA spokesman Jonathan Swain agree that there are indications that small businesses are definitely headed for recovery, but big results might not happen for quite some time.
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2010-01-07 10:38:00
