MONROE - Is this really the best time to start a new business, or to expand a current one?
The financial crisis has created a variety of conditions that impact small businesses. Declines in the Small Business Administration's lending volume last year, which are continuing in the 2009 fiscal year, reflect problems in the broader credit markets, and present hurdles to small businesses seeking credit in the current economy.
Many entrepreneurs are experiencing a lack of liquidity in the banking system, a reluctance of many lenders to extend new loans, tightened credit standards, weaker finances in their businesses, and uncertainty about taking on new debt.
"It's pretty wild times," David Vobora, business development coordinator for Southwestern Wisconsin Community Action Program (SWCAP), said.
SWCAP helps people create business startup or growth plans, and supplies marketing support and small business loans, through its business development program. SWCAP's mission is to help people in Grant, Green, Iowa, Lafayette and Richland counties improve their standard of living through self-employment.
The Small Business Administration (SBA) issued a news release February 18 outlining the American Recovery and Reinvestment Act (ARRA) package of loan fee reductions, higher guarantees, new SBA programs, secondary market incentives, and enhancements to current SBA programs that will help unlock credit markets and begin economic recovery for the nation's small business sector.
"This bill gives us specific tools to make it easier and less expensive for small businesses to get loans, give lenders new incentives to make more loans, and help restore healthy SBA secondary markets to boost liquidity," Acting SBA Administrator Darryl K. Hairston said.
The economic stimulus package has many implications for those who work for Community Action Programs.
"My clients have always been eligible to apply to SBA loan guaranty programs. Sometimes SBA loan guarantees have been a good fit, other times not. Funding from the Recovery Act attempts to open up SBA criteria and, thereby, make SBA programs a good fit for a broader range of small business borrowers," Vobora said.
New and revised SBA programs may make it easier for some to qualify for a SBA guaranteed loan. ARRA also authorizes refinancing for certain SBA loans so borrowers can expand their businesses on favorable terms, and expands leverage capability for Small Business Investment Companies.
"The SBA's intent continues to be to encourage local lenders to prudently issue small business loans. The SBA doesn't really issue loans directly. SBA programs are administered through local, participating financial institutions. When someone applies to an SBA program, they don't apply to Washington D.C. Instead, they apply to a bank or other lender in their home town who is enrolled with the SBA," Vobora said.
"The SBA encourages local lenders to issue loans by offering them some protection against loss. While the SBA is attempting to spur more small business lending by offering more guarantees, my clients - and any other potential SBA borrowers - will continue to follow the same basic application process," he added.
The ARRA bill provided $730 million to SBA and makes changes to the agency's lending and investment programs so they can reach more small businesses that need help.
"The tax incentives and credit stimulus elements of the Recovery Act will truly help small business owners affected by the credit crunch, and will provide financing opportunities to help them create new jobs in their communities," Hairston said.
The stimulus bill takes a comprehensive approach and attacks several problems facing small businesses at once by reducing fees, guaranteeing a greater share of certain loans, expanding capacity in the Microloan program, providing new loans to help small businesses keep their doors open through economic hardship, as well as new mechanisms to help unfreeze the secondary markets for SBA-backed loans.
The bill allows SBA to raise its loan guarantee from the current levels to as much as 90 percent for some loans, which SBA said will encourage lenders to extend more capital to small businesses by increasing the share covered by an SBA guarantee and help small businesses compete for contracts.
The bill expands SBA's Microloan program, which provides small loans (up to $35,000) paired with technical assistance to start-up, newly established or growing small businesses. The bill provides funding to increase loans from SBA to participating Microlenders by $50 million through September 30, 2010, and adds $24 million in grants to provide technical assistance to borrowers. Historically, these loans reach low-income individuals, women and minorities in both rural and urban areas. Expanding this program through the stimulus bill will help ensure these entrepreneurs are not left behind in the credit crunch.
The bill authorizes SBA to deploy federal guarantees for pools of "first lien" loans from commercial lenders, under the 504 program, so that they can be sold to investors in a secondary market.
The bill also gives SBA the power to use the 504 (Certified Development Company) program to refinance existing loans for fixed assets, providing fresh support for small business expansion. This change will help business owners expand their current development projects and create jobs in their communities.
The bill increases the current contract limit for SBA's Surety Bond Guarantee program from $2 million to $5 million, and, under certain circumstances, for contracts amounting to $10 million. Small businesses need surety bonds in order to bid on and obtain many federal and other contracts.
"There's a lot to digest in the legislation, and SBA has established teams to tackle a wide variety of policy decisions, system modifications, regulatory changes, legal requirements, and new program launches authorized by the President and Congress," said Hairston.
Of the $730 million, $25 million will go for more staff to meet demands for new programs, and $10 million for the Office of Inspector General.
Hairston said more details will be released as they become available. More information on SBA Recovery programs can be found at www.sba.gov/recovery.
The financial crisis has created a variety of conditions that impact small businesses. Declines in the Small Business Administration's lending volume last year, which are continuing in the 2009 fiscal year, reflect problems in the broader credit markets, and present hurdles to small businesses seeking credit in the current economy.
Many entrepreneurs are experiencing a lack of liquidity in the banking system, a reluctance of many lenders to extend new loans, tightened credit standards, weaker finances in their businesses, and uncertainty about taking on new debt.
"It's pretty wild times," David Vobora, business development coordinator for Southwestern Wisconsin Community Action Program (SWCAP), said.
SWCAP helps people create business startup or growth plans, and supplies marketing support and small business loans, through its business development program. SWCAP's mission is to help people in Grant, Green, Iowa, Lafayette and Richland counties improve their standard of living through self-employment.
The Small Business Administration (SBA) issued a news release February 18 outlining the American Recovery and Reinvestment Act (ARRA) package of loan fee reductions, higher guarantees, new SBA programs, secondary market incentives, and enhancements to current SBA programs that will help unlock credit markets and begin economic recovery for the nation's small business sector.
"This bill gives us specific tools to make it easier and less expensive for small businesses to get loans, give lenders new incentives to make more loans, and help restore healthy SBA secondary markets to boost liquidity," Acting SBA Administrator Darryl K. Hairston said.
The economic stimulus package has many implications for those who work for Community Action Programs.
"My clients have always been eligible to apply to SBA loan guaranty programs. Sometimes SBA loan guarantees have been a good fit, other times not. Funding from the Recovery Act attempts to open up SBA criteria and, thereby, make SBA programs a good fit for a broader range of small business borrowers," Vobora said.
New and revised SBA programs may make it easier for some to qualify for a SBA guaranteed loan. ARRA also authorizes refinancing for certain SBA loans so borrowers can expand their businesses on favorable terms, and expands leverage capability for Small Business Investment Companies.
"The SBA's intent continues to be to encourage local lenders to prudently issue small business loans. The SBA doesn't really issue loans directly. SBA programs are administered through local, participating financial institutions. When someone applies to an SBA program, they don't apply to Washington D.C. Instead, they apply to a bank or other lender in their home town who is enrolled with the SBA," Vobora said.
"The SBA encourages local lenders to issue loans by offering them some protection against loss. While the SBA is attempting to spur more small business lending by offering more guarantees, my clients - and any other potential SBA borrowers - will continue to follow the same basic application process," he added.
The ARRA bill provided $730 million to SBA and makes changes to the agency's lending and investment programs so they can reach more small businesses that need help.
"The tax incentives and credit stimulus elements of the Recovery Act will truly help small business owners affected by the credit crunch, and will provide financing opportunities to help them create new jobs in their communities," Hairston said.
The stimulus bill takes a comprehensive approach and attacks several problems facing small businesses at once by reducing fees, guaranteeing a greater share of certain loans, expanding capacity in the Microloan program, providing new loans to help small businesses keep their doors open through economic hardship, as well as new mechanisms to help unfreeze the secondary markets for SBA-backed loans.
The bill allows SBA to raise its loan guarantee from the current levels to as much as 90 percent for some loans, which SBA said will encourage lenders to extend more capital to small businesses by increasing the share covered by an SBA guarantee and help small businesses compete for contracts.
The bill expands SBA's Microloan program, which provides small loans (up to $35,000) paired with technical assistance to start-up, newly established or growing small businesses. The bill provides funding to increase loans from SBA to participating Microlenders by $50 million through September 30, 2010, and adds $24 million in grants to provide technical assistance to borrowers. Historically, these loans reach low-income individuals, women and minorities in both rural and urban areas. Expanding this program through the stimulus bill will help ensure these entrepreneurs are not left behind in the credit crunch.
The bill authorizes SBA to deploy federal guarantees for pools of "first lien" loans from commercial lenders, under the 504 program, so that they can be sold to investors in a secondary market.
The bill also gives SBA the power to use the 504 (Certified Development Company) program to refinance existing loans for fixed assets, providing fresh support for small business expansion. This change will help business owners expand their current development projects and create jobs in their communities.
The bill increases the current contract limit for SBA's Surety Bond Guarantee program from $2 million to $5 million, and, under certain circumstances, for contracts amounting to $10 million. Small businesses need surety bonds in order to bid on and obtain many federal and other contracts.
"There's a lot to digest in the legislation, and SBA has established teams to tackle a wide variety of policy decisions, system modifications, regulatory changes, legal requirements, and new program launches authorized by the President and Congress," said Hairston.
Of the $730 million, $25 million will go for more staff to meet demands for new programs, and $10 million for the Office of Inspector General.
Hairston said more details will be released as they become available. More information on SBA Recovery programs can be found at www.sba.gov/recovery.