Will the New Stimulus Package Boost SBA Lending?
The problem of declining SBA loans is being addressed in the House and the Senate while both small business owners and banks await the details. According to an article by Kent Hoover in BusinessWeekly, the new stimulus package will likely include steps to revive the Small Business Administration’s lending programs. However, the solutions in the House and Senate bills differ.
The House bill would increase the government guarantee to 95% on SBA 7(a) loans, and authorize the Small Business Administration to make loans directly to small businesses, while the Senate bill would temporarily waive loan fees and increase the maximum size of 7(a) loans from $2 million to $3 million, according to the article.
Increasing the government guarantee on SBA loans to 95% would reduce the risk to lenders and encourage banks to make more loans to small businesses, as would a reduction in fees. Currently there are interest caps on SBA loans and this makes them less profitable for banks, so it would make sense for a stimulus plan to include these lending incentives. More controversial is the idea of the SBA making the loans directly to small businesses.
Hoover interviewed a number of people who are concerned about the Small Business Administration’s ability to recreate itself into an organization that makes loans. The process would take too much time, the SBA doesn’t have the personnel, and the customer service would be lousy, they argue.
It seems everything is taking too much time these days, as small businesses and banks alike continue to flounder. For example, what’s going on with TALF (the Term Asset-Backed Securities Loan Facility)? Wasn’t that supposed to make loans to secondary market investors who purchase SBA-guaranteed loans? That doesn’t seem to be working to unfreeze the secondary credit market that banks depended on to purchase many of their SBA loans. I guess we will all have to wait and hope that this new stimulus plan will be the one that kick-starts lending, small business development, and the economy as a whole.
