The Small business Administration has been charged with helping companies weather the recession, and all of this money is running out. The 7(a) lending program provides loans, personal and large, to small businesses around the country. The program, funded by the American Recovery and Reinvestment Act, is at the moment in a holding pattern, waiting for more money.
Article resource: SBA running out of low cost loans to businesses by Personal Money Store
How the SBA is able to provide low cost loans
The SBA doesn't give instant cash 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 money lender to small businesses. The stimulus package authorized the SBA to waive fees and guarantee up to 90 percent of a loan’s value.
The effect of SBA loans
Small companies are often forced to rely on credit and payday lending to keep their companies going. Over a small 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 instant cash loans for cash-strapped businesses. The program, nevertheless, is nevertheless waiting for some new authorization, which is leaving millions of dollars of loans in limbo.
The 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 available 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 company.
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