SBA program extension could add about $1.8 billion in small-business lending
President Barack Obama signed legislation March 2 extending until March 28 the Small Business Administration's (SBA's) ability to provide small-business loans that include the American Recovery and Reinvestment Act's special provisions, including a higher guarantee of SBA-backed loans and waiving loan fees borrowers normally pay. SBA estimates the additional funding will support about $1.8 billion in small-business lending.
New approvals of eligible loans with the act's provisions are expected to resume March 10. Loan applications from borrowers in SBA’s Recovery Loan Queue will be funded first followed by new loan applications.
As part of the American Recovery and Reinvestment Act, SBA received $730 million, which included $375 million to increase the SBA guarantee on 7(a) loans to 90 percent and waive borrower fees on most 7(a) and 504 loans. The funds for these programs were exhausted Nov. 23, 2009, and an additional $125 million was provided in December 2009. Those funds were exhausted in late February.
SBA has implemented the Recovery Loan Queue twice before as part of its temporary transitions back to pre-American Recovery and Reinvestment Act lending. Eligible small businesses could choose to be placed in the queue for possible approval of an American Recovery and Reinvestment Act loan if funding became available from loans canceled for a variety of reasons. There currently are 652 loan requests totaling $230 million in the Recovery Loan Queue.
The extension signed by President Obama authorizes the higher guarantee levels through March 28 for 7(a) loans. The fee relief is available until the additional funding is exhausted or the end of the fiscal year Sept. 30—whichever comes first. SBA is prepared to transition into a queue system as the funds start to wind down to ensure the maximum stimulative effect of the programs and fund disbursement.
For non-American Recovery and Reinvestment Act 7(a) or 504 loans already funded during the transition period, the extension does not provide a retroactive guarantee or waived fees. Loans that were funded under such terms cannot be canceled and resubmitted to take advantage of the extension provisions.
The extension does not affect other SBA American Recovery and Reinvestment Act programs, including the America's Recovery Capital loan program or SBA's microloans. American Recovery and Reinvestment Act funding remains available for those programs.
3/10/2010
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