Sba Doubled Its Lending Programs For Small Businesses

In this recession period the lending market was almost on its back foot

, at least it was so for many small businesses. The banks and the other financial institutes were very much reluctant to extend credit lines to small businesses. As a result the angel and other private investors have gained more control over the market by extending credit lines to those businesses which were declined by the banks and other financial institutes at a higher interest rate. In fact, it has been noticed that a large number small sized companies, be it an online service provider or a manufacturing company, have opt for private financial even at a higher interest rate to meet their business requirements in this bad economic time.

Considering the situation, the Small Business Administration (SBA) has doubled their lending program in the past three months so that the small business owners can meet their need without paying more interests to the private investors. During the second fiscal quarter of Small Business Administration the 7(a) lending program of the governments processed around 16,558 loans. This figure is more than double the number of loans that it processed during the first three months of the year 2009, when this body lent out $1.6 billion. This time the total loans provided under the SBA 7(a) program amounted to $3.7 billion.

This lending programs, as the SBA and the federal government claimed, will help the small businesses not only to survive in such a cutthroat competitive market but will also help in creating new job opportunities. The latter, as President Obama promised, is the prime focus of the government. Moreover, the government estimated that it is the small business owners and their firms who have created around 65% of the new job opportunities over the 15 years in America. Thereby, it is now the responsibility of the government to support the small businesses during this bad economy so that they can continue creating new job opportunities all across the country.

Better yet, the government also provide a $375 million funding pool, as a part of the Recovery Act which was passed in February 2009, to eliminate fees for the SBA loans temporarily. Moreover, the portion of the loan guaranteed by the government is increased to 90%. This signifies that the federal government will provide major portion of the loan in case the small business owner fails to pay back the amount. This further reduces the risks for the lenders and simultaneously will roar up the lending market.

The terms of SBA 7(a) program is favorable for both the lenders and the borrowers. And the President has sanctioned an additional $40 million for extending the program for the month of April as the SBA ran out of funding at the end of March.

Thereby the small businesses that require funds to continue with their day to day operations must consider the SBA 7(a) program as their first option. Those who have been declined by banks and other financial institutes must also think about this option. However, the only problem is that there is a huge demand for such loans and you need to be very quick in your action. The good news is that this Recovery Act loan have already provided over $24 billion to small businesses and are willing to provide more funds to support the program.

by: Emily Ralph

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