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Government Greenlights Small Business Loans

Nearly $1 billion in loans lined up in the U.S. Small Business Administration’s (SBA) queue have received final approval, speeding the delivery of critical capital to more than 1,900 small business owners. In the process, the SBA was able to lure banks back into the fold that had abandoned making SBA loans during the credit crunch in late 2008 and early 2009.

Final approval followed President Obama’s signing of the Small Business Jobs Act on Sept. 27, which reduced fees in the SBA’s two largest programs — the 7(a) Loan Guaranty Program and the Certified Development Company 504 Loan Program — and lifted the federally guaranteed ceiling from 75 percent to 90 percent of loan principal. The increased guarantee limits restored banker confidence in the soundness of making SBA loans and is widely seen as the carrot that lured some 1,300 lenders to come back into the SBA loan program. 

The savings for small business from the reduction in fees for these loans will be substantial. On a $ 2 million loan, fees for a conventional SBA loan would be approximately $60,000, according to SBA spokesperson Hayley Matz.  Many small businesses have reported they will reinvest those savings in their companies, she said.

The SBA approved more than $586 million through 1,273 new loans with funds provided by the Small Business Jobs Act , and 666 loans for more than $383 million with earlier funding that became available after cancellations of applications that had been approved previously under Recovery Act loan terms, most because they had been withdrawn by the applicants.

The total monetary infusion into the small business economy amounted to 1,939 new loans worth nearly $970 million.

“Enhancements first made under the Recovery Act have made SBA-backed loans a key source of much-needed capital for tens of thousands of small business owners, helping them not just keep their doors open, but also grow and create jobs all across the country,” said SBA Administrator Karen Mills. “Beginning in May, we saw the SBA loan queue begin to grow, which was evidence of both the continued need for these tools and the challenges small business owners face in getting loans.”

The Small Business Jobs Act will support an estimated $14 billion in lending with only $505 million in taxpayer funds, she said, including many of the loans approved from the queue.

The increased guarantees and reduced fees in SBA’s two largest lending programs sparked a significant turnaround in SBA lending and have been instrumental in helping jump-start the economy for small businesses, the SBA said.

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com.  Follow him on twitter@nedbsmith.