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View Full Version : SBA Small Business Lending Help - Pushed Back – Again!



phanio
04-18-2009, 04:59 AM
Read a blog this week from Kelly Spors of the Wall Street Journal - regarding the state of the SBA and the stimulus package money it is using to help spur small business lending. The blog is as follows:

SBA Months Behind In Changes Meant To Spur Lending

There’s some bad news for people hoping President Obama’s plans to spur small-business lending would reap quick results.

A Government Accountability Office report released yesterday says the Small Business Administration will be a few months late installing some new regulations meant to revive SBA lending, which has fallen considerably over the past year. Two changes mandated by the $787 billion stimulus plan, including cutting loan fees and raising loan guarantees for borrowers, were enacted in the 15-to-30-day window required by the stimulus. But the agency missed two March deadlines to increase guarantees on secondary market SBA real-estate and equipment loans and to issue regulations involving “systemically important” broker-dealers in the secondary market.

SBA officials, including new administrator Karen Mills, told the GAO they hoped to have those regulations issued by June. Enacting such rules was too complicated to complete in the short period the stimulus plan required and need to be executed in a way as to not create taxpayer losses, they said.

The delays could mean it takes longer for the Treasury Department to execute its plan to spend up to $15 billion buying up SBA loans on the secondary market, according to an article in the Dallas Morning News.

But the GAO report wasn’t all bad news. Despite the delay, Ms. Mills told the GAO that SBA loan volume is up 20% since mid-March. What’s more, a Dow Jones Newswires article about the GAO report said it’s unclear how much SBA’s actions would affect SBA lending volumes and secondary market anyway, as the Treasury’s plan to buy up loans on the secondary market could help stimulate lending the most.

Hopefully June – Hopefully! Just remember this in your own business – the goal is to under-promise and over-deliver – not the other way around.

vangogh
04-19-2009, 05:49 PM
I guess this shows how things take time and often more time than we'd like. At the top the idea is to get things moving as soon as possible, but implementing change sometimes takes more time than thought.

Then again it could be that the SBA is dragging it's feet some. Hard to know without details.

For example on the surface cutting loan fees sounds very easy. You just change the fees. The details though could mean those fee cuts would necessitate job cuts or reorganization to keep jobs. That would make getting into a 15-30 day window more difficult.

In the end even if things take longer than hoped for, if this leads to an SBA that could support businesses more with loans it should ultimately be good for small businesses.

masinka
06-09-2009, 03:53 PM
Last week, the Obama administration said it would try to make it easier for borrowers to apply for SBA loans, and for lenders to make the loans, which are guaranteed in part by the government.
Officials want to encourage recession-easing job growth by getting more SBA loans into the hands of small-business owners. The reasons are highlighted in my blog blog about current small business stimulus package passed by congress and signed into law by president Obama.

phanio
06-11-2009, 04:38 PM
I understand that SBA applications are picking. Many banks that use to offer them are still not - but there has been and increase in the number of banks that did not offer them in the past but are offering them now.

Still, I have been hearing that while applications are up - they are still having trouble with the creditworthiness of the borrower. Bad markets usually always lead to bad credit and little collateral value.

Ad-Vice_Man
06-12-2009, 11:15 AM
I understand that SBA applications are picking. Many banks that use to offer them are still not - but there has been and increase in the number of banks that did not offer them in the past but are offering them now.

Still, I have been hearing that while applications are up - they are still having trouble with the creditworthiness of the borrower. Bad markets usually always lead to bad credit and little collateral value.

Collateral isn't the issue with the SBA... In fact it's the part of the lending equation the SBA is set up to overcome. The problem even moreso than the credit rating of the business owner is demonstrating the Cash flow to be able to repay the loan.

phanio
06-13-2009, 09:51 PM
You are correct Ad-Man:

Banks (any lender) looks for two major things. 1) The ability to repay (cash flow to service the loans - this cash flow does not have to come from the business - it could also be outside income) and 2) The willingness to repay - meaning credit history - have you paid your creditors in the past.

Once you get by this - then they look for ways to secure the loan. Most lenders like to see three items. 1) One is usually cash flow as stated above. 2)the conversion of assets (turning A/R or inventory) - if this is not possible then collateral to match the loan amount - something that the lender can convert, and 3) personal guarantees.

The problem with loans of any type today is that very few are passing first muster (poor credit and no income - meaning not creditworthy). But, for those who do pass - usually fall short on the other - especially collateral given that in this market the value of items has also fallen drastically. An SBA loan can help you overcome some of this - but not all of it - the banks also have to approve the loan. Now, if you are short - e.g. can put 10% down instead of the standard 20% or if your collateral can cover say 80% and not the 100% of the loan amount the SBA loan may work - provided you have every other thing in place - specifically cash flow.

But, you are correct - if you have great cash flow - you have a better chance. But, many businesses with great cash flow don't need outside funds (kind of why they say you can only get a loan if you don't need it).

stevewalter
06-15-2009, 03:10 PM
Nice sharing...