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Dec 16

SBA guarantees get easier

Posted by dbedell in Small Business AdminstrationSBAFinanceCash


Two new programs out from the Small Business Administration (SBA) promise easier loan access for US companies, which is good news for the many small firms that have struggled to get funding from banks over the past few years.

The first program is called Small Loan Advantage, and its main goal is to reduce the paperwork involved in getting loan approval and decrease the wait-time from application to money receipt.

Through the program, approved lenders in the SBA's 7(a) lending program can offer SMEs up to $250,000 and get SBA approval quite quickly with submission of just a single-page credit memo. Electronic applications will be processed within minutes, while paper applications will take up to one business day, according to the SBA.

Loans through the SBA's 7(a) program are backed at 85 percent for the first $150,000 and 75 percent for the additional amount, up to the $250,000 limit. There are more than 600 approved banks in the US under the SBA program.

Community Advantage-the second new initiative from the SBA-is geared towards underserved communities, including small businesses owned by minorities, women, and veterans, and small companies or entrepreneurs in rural or lower-income locales.

The Community Advantage program takes a very different approach than other SBA lending initiatives by actively recruiting micro-finance firms and community-based lending institutions to the 7(a) loan guarantee program. In the past, such institutions were not able to access the 7(a) program.

These programs should help both traditional and underserved small companies get faster access to funding through a simplified application process, and increased access to government guarantee programs for non-traditional lenders.

The actual demand for such programs is unclear, however, as data on SME lending of late had been far from consistent.

In a blog this week, our own Anne Field reported on the contradictory small business lending data coming from just one source: the Fed. Plus, banks themselves have been saying for months that they are not seeing high demand for small business loans.

Nonetheless, for those companies that have had difficulty getting access to lending facilities, the new SBA programs-which should be live in March-could open the door.

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