Small Business Borrowing – A Primer on SBA Loan Programs

By: Mark Battersby
August 4, 2009

The White House recently announced a $15 billion plan to ease the credit crunch affecting many gift and decorative accessories businesses. One program earmarks funding for loans and technical assistance by the U.S. Small Business Administration’s (SBA) “microloan” lenders.

In addition to extra funding for microloans, the new program will reduce small-business lending fees and increases the amount the SBA will guarantee on some small business loans. However, the new program does not stop there.

The Recovery Program
The U.S. Treasury Department will boost bank liquidity, using $15 billion from the U.S. Treasury to purchase small business loans in the secondary markets. These purchases will free up lending by community banks, credit unions and other small business lenders that account for 40 percent of all SBA-backed lending.

The SBA will immediately raise guarantee levels on some of its loans and temporarily eliminate certain loan fees. Microloan intermediaries are providing loans of up to $35,000 to start-up, newly established and growing small businesses.

Come and Get it
The SBA does not actually make loans to businesses; it is primarily a guarantor of loans made by private banks and other institutions. SBA-backed loans do, however, carry lower interest rates and lower fees than their commercial counterparts, thus making them more affordable for entrepreneurs and small business owners.

An SBA guarantee gives gift and decorative accessories retailers, manufacturers and distributors access to the same kinds of reasonably priced, long-term financing available to large businesses by virtue of their size and economic clout. Borrowers apply for loans directly with a lending institution, such as banks, credit unions or Small Business Lending Companies.

This article first appeared in Gifts & Decorative Accessories and is reprinted with permission. The full text is available at http://www.giftsanddec.com/article/CA6663813.html?q=.

About the Author
Mark E. Battersby is a writer with more than 25 years experience of reporting the news and developments in the tax and financial arenas. He can be reached at MEBatt12@earthlink.net

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