Key SBA Funding Restored, But Only Thru February

Tight CreditSome small business borrowers got some good news – at least through Feb. 28 – after the U.S. House passed a defense appropriations bill that included restoration of two key stimulus funding programs for the Small Business Administration.
“Small businesses represent a major engine for the U.S. economy, but many small business owners have had a difficult time securing needed loans in these tight economic times,” a House statement said.
The legislation permits the U.S. Small Business Administration to raise the percentage of loan amounts that it can guarantee back up to 90 percent. The SBA would also be given the authority “to waive or reduce loan fees.” The funding extension, however, expires on Feb. 28.
Last month, the SBA announced that economic stimulus funds for its two top loan programs had run dry. The SBA said $375 million in Recovery Act funds for use in “7(a)” and “504″ loan programs ended, leaving thousands of small business applicants in limbo.
The money was used to temporarily reduce fees on SBA-backed loans and raise SBA’s guarantee percentage on some loans from 75 percent to 90 percent. This meant a savings of tens of thousands of dollars in fees to applicant businesses. 
It also eased the burden on lenders who were more willing to issue credit.
Today, President Barack Obama is to meet with community bank executives in a continuing effort by the administration to reinvigorate small business lending, a vital sector of the economy that is lagging behind.
Federal Reserve officials have said that regional and small banks are still vulnerable to the deteriorating performance of commercial loans and they continue to tighten lending standards.
Small businesses are expected to continue to grapple with tight credit standards, and “will restrain from hiring” as a result, Fed officials projected.

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