Last week, President Obama signed legislation that will pump another $80 million of stimulus money into the Small Business Administration’s lending programs. That sum may not sound like much, but the SBA estimates that this increased funding will support nearly $3 billion in lending to America’s small businesses.
In particular, these added funds will help small business owners get 7(a) loans (for general needs) and 504 loans (for real estate.) But there’s more to this than money. The legislation also ensures higher guarantee levels on the loans and allows small business owners to temporarily avoid paying fees.
“Small businesses across the country have been able to secure critical financing as a result of the Recovery Act loan provisions and the continued interim funding we’ve received for the program,” SBA Administrator Karen Mills said in a press release. “The increased guarantees and reduced fees on SBA loans have generated more than $25 billion in new loans to small business owners and brought more than 1,200 lenders back to SBA loan programs.”
“These programs have been successful in helping jump-start our economy,” Mills added. Some, no doubt, may view this claim with a bit of skepticism, but the effects of the stimulus funds are real, even if we don’t hear about them every day.
One braided rug manufacturer in Rhode Island managed to save 75 jobs and secure the necessary funds to stay in business thanks to a $300,000 loan from the SBA through the Recovery Act. Cutting the fees that borrowers need to pay allowed one restaurant in Buffalo, N.Y., to do some needed remodeling. And contrary to what some might believe, these loans don’t just go to people with existing businesses. Gary Skrla from Everett, Wash., scored a handsome $879,000 loan from the SBA to open his own hardware store after being laid off from a corporate job.
Still, there is a downside. This legislation marks the third time that the Obama administration has extended stimulus funds to the Small Business Association. But as Inc Magazine points out, “month-to-month extensions have caused the small-business lending market to experience a series of halting starts and stops. Each extension has come after funds dried up, and borrowers had to wait in line hoping a cash infusion would arrive.”
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