On Monday, March 16th, in an effort to recharge the economy (specifically the job market), the Obama Administration announced that the Treasury Department would purchase up to $15 billion in securities backed by Small Business Administration (SBA) loans in an effort to unfreeze the secondary market for SBA Loans.
This announcement is welcomed news to lenders and borrowers alike. It’s also likely to shift the talk away from the mismanagement of Federal funds and the scandalous behavior of business giants like AIG.
What does this mean for Lenders and Borrowers?
Increased Capital:
The bill will increase SBA lending to small businesses by allowing lenders to sell their existing loan portfolios on the secondary market and free up capital to make new loans.
Reduced Fees:
In addition to creating increased capital, the administration is proceeding with plans to eliminate fees for borrowers and reduce fees for lenders in its two signature small business lending programs (SBA 7(a) and 504).
Reduced Risk:
At present, SBA can guarantee up to 85 percent on loans up to $150,000, and up to 75 percent on loans greater than $150,000. The new bill allows SBA to raise its loan guarantee from the current levels to as much as 90 percent for some loans. Increasing the SBA guarantee percentage will encourage lenders to extend more capital to small businesses. With the reduced risk and additional capital, the Obama Administration believes that lenders and borrowers will use the funds to stimulate small business growth and create jobs.
Increased Accountability:
In an effort to track the bill’s effects and maintain accountability, the bill requires that lenders who received Federal bailout funds provide monthly figures on their small businesses lending. All other lending institutions must now report their small business-lending quarterly, rather than annually.
As new aspects of the bill emerge we will continue to examine the potential impacts on small business and commercial lending. So, stay tuned for future updates.
For more information about SBA loan programs please visit: http://www.sba.gov/ or contact Attorney Adam WP Goncalves at (617) 244-2665.
This announcement is welcomed news to lenders and borrowers alike. It’s also likely to shift the talk away from the mismanagement of Federal funds and the scandalous behavior of business giants like AIG.
What does this mean for Lenders and Borrowers?
Increased Capital:
The bill will increase SBA lending to small businesses by allowing lenders to sell their existing loan portfolios on the secondary market and free up capital to make new loans.
Reduced Fees:
In addition to creating increased capital, the administration is proceeding with plans to eliminate fees for borrowers and reduce fees for lenders in its two signature small business lending programs (SBA 7(a) and 504).
Reduced Risk:
At present, SBA can guarantee up to 85 percent on loans up to $150,000, and up to 75 percent on loans greater than $150,000. The new bill allows SBA to raise its loan guarantee from the current levels to as much as 90 percent for some loans. Increasing the SBA guarantee percentage will encourage lenders to extend more capital to small businesses. With the reduced risk and additional capital, the Obama Administration believes that lenders and borrowers will use the funds to stimulate small business growth and create jobs.
Increased Accountability:
In an effort to track the bill’s effects and maintain accountability, the bill requires that lenders who received Federal bailout funds provide monthly figures on their small businesses lending. All other lending institutions must now report their small business-lending quarterly, rather than annually.
As new aspects of the bill emerge we will continue to examine the potential impacts on small business and commercial lending. So, stay tuned for future updates.
For more information about SBA loan programs please visit: http://www.sba.gov/ or contact Attorney Adam WP Goncalves at (617) 244-2665.
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