The Small business Administration has been charged with helping businesses weather the recession, and money is running out. The 7(a) lending program provides loans 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.
Article source: SBA running out of low cost loans to businesses by Personal Money Store
How SBA provides low cost loans
The SBA isn't really the company to give money to business owners. Instead, the government agency backs up loans made by banks. With the SBA “insurance policy” against default in place, banks are much more willing to act as payday loan store to small businesses. The stimulus package authorized the SBA to waive fees and guarantee up to 90 percent of a loan’s value.
SBA loans and their effect
To keep their business going, small companies rely on credit. Over just a three-month period of April, May and June, the SBA lent out $ 3 billion over 12,123 loans. Compared to the exact same quarter of 2009, that is 21 percent more payday advances for cash-strapped companies. The program is nevertheless waiting for re-authorization, which is leaving millions of dollars of loans in limbo.
Loan queue for SBA
Since the official authorization for SBA loans expired in May, the agency was forced to queue requests for loans. There are presently 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 that are available to these businesses, the agency is scrambling to help them discover 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 company.
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