Gov't Takes Steps to Make SBA Loans Easier to Get

Small business owners who have watched banks and automakers get assistance from the government can now receive some help too.

The government is making it easier for companies to get loans from the Small Business Administration. It's eliminating fees on its most popular loans, known as 7a loans, and guaranteeing a larger portion of the amount borrowed. It's also eliminating fees on what are called CDC/504 loans.

Small businesses will also benefit from the Troubled Asset Relief Program, or TARP, that's been used to bail out banks. The government will use $15 billion in TARP money to buy already issued small business loans in what's known as the secondary market.

That plan, according to SBA spokesman Mike Stamler, will enable lenders to get old loans off their books and allow them to create new ones. The slowdown in credit markets has made it harder for banks to sell their loans and move on to the next borrower.

"Maybe that pulls the twig out that's holding the logjam up," Stamler said.

Small business lending as measured by approvals of 7a loans has plunged over the past two years. In 2007, when the economy was still doing well, just over 99,600 loans totaling $14.3 billion were approved, according to the SBA. Last year, those numbers dropped off to 69,434 loans and $12.67 billion.

So far this year, loan approvals are down 50 percent from the same period of 2008. More than 15,400 loans totaling $3.2 billion have been approved.

The SBA's 7a loan program is intended to help small businesses borrow for a variety of reasons when they haven't been able to get a loan otherwise. The key feature of these is the government's guarantee of a substantial amount of a loan, which removes much of the risk from a bank or other lender.

But even that guarantee hasn't made small business borrowing easier, Stamler said. So the government is increasing the portion of a 7a loan it will guarantee to 90 percent from the previous amount of 75 percent to 85 percent. The upper limit for guaranteed loans remains unchanged at $1.5 million.