The American Recovery and Reinvestment Act, President Barak Obama’s $787 billion spending bill, was enacted in February, and while its effects on the auto industry and banking have been discussed daily in the news, the assistance plans it offers for small business are less widely known.
“The bill does contain a 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,” says Harry Menta, public affairs officer for the Newark office of the Small Business Administration. The bill provides $730 million to the SBA and makes changes to the agency’s lending and investment programs aimed at offering more assistance to small businesses.
In order to explain the new programs and regulations to small business owners, government officials, and others, the SBA will hold a free forum Tuesday, April 21, at 8:30 a.m., at the College of New Jersey. Call 973-645-2530 or E-mail firstname.lastname@example.org. More information can also be found at www.SBA.gov/recovery and www.recovery.gov
There are five main components in the program: Tax incentives, higher loan guarantees, temporary reductions of loan fees, new programs, and enhancements to current programs designed to help unlock credit market, says Menta, who has been with the SBA for 28 years. He first joined the SBA as an intern while working to obtain his bachelor’s in journalism from Northeastern in 1981.
Elimination of fees. Some $375 million has been designated for the “temporary elimination of fees on SBA loans,” says Menta. In addition, guarantee limits have been raised up to 90 percent on most types of loans.
Also, $30 million has been allocated to expand the SBA’s Microloan program. This is enough to finance up to $50 million in new lending and $24 million in technical assistance grants to micro lenders. Under the program, small business owners are allowed to borrow up to $35,000 through SBA’s approved microloan intermediaries.
Refinancing fixed assets. This program allows small business owners to refinance existing loans for fixed assets, providing fresh capital for small business expansion as well as temporarily eliminating loan fees for both borrowers and lenders. The loans cannot be used for working capital, he adds.
Investment program. “The bill also helps SBA-licensed Small Business Investment Companies (SBICs) and families of SBIC funds to better leverage the capital they use to invest in small businesses,” Menta says. The bill sets the maximum levels of funding that the agency can provide to these companies at up to three times the private capital raised by those companies, or $150 million, whichever is less.
It also raises the percentage any one SBIC can invest in a single small business to 10 percent of total capital, and raises from 20 to 25 percent of any licensee’s dollar investments that must be made in smaller businesses.
The purpose of all of the new program changes and additions is to “give small business owners a little breathing room, as well as to get the ball rolling on lending again,” says Menta. “We hope that both lenders and small business owners will take advantage of these changes as quickly as possible. “
The goal of the SBA in New Jersey is “to get lending back to the level of two years ago as quickly as possibly,” he adds. “These new programs will jumpstart our lenders and bring them back to table.”