The Small business Administration has been charged with helping companies weather the recession, and money is running out. The 7(a) lending program gives out loans, personal and large, to small businesses around the country. The program, which was funded by the American Recovery and Reinvestment Act, is presently in a holding pattern, waiting for more money.
How the SBA is able to provide low cost loans
The Small company Administration itself doesn’t give online cash loans to business owners. Loans made by banks are backed up by the government agency. With the SBA “insurance policy” against default in place, banks are much more willing to act as personal loan company to often cash-strapped small companies. The stimulus package authorized the SBA to waive fees and guarantee 90 percent of a loan’s actual value.
The effect of SBA loans
To keep their business going, small companies rely on credit. Over just a three-month period of April to June, the SBA lent out $ 3 billion over 12,123 loans. Compared to the very same quarter of last year, that is 21 percent more small cash loans for cash-strapped companies. The program, however, is nevertheless waiting for re-authorization, which is leaving millions of dollars of loans in limbo.
The loan queue for SBA
Since the authorization for SBA loans expired in May, the agency has been forced to queue requests for loans. There are 419 borrowers waiting for more than $ 123 million in SBA-guaranteed funding. Because these SBA loans are often one of the very few types of credit accessible to these companies, the agency is scrambling to help them find financing. Given the length of the recession thus far and the fact the economy is not yet growing at a steady pace, it is almost for certain that programs such as the SBA 7(a) program will have to continue providing support for small business.
