Good news for small business. President Obama and Treasury Secretary Tim Geithner will announce today plans to increase the ease at which small businesses will be able to get loans.
The plan deals with two programs handled by the Small Business Administration.
The 7(a) program allows small businesses to get loans of up to $2 million backed by the federal government through the SBA. Currently, the government guarantees up to 85 percent of loans below $150,000, and up to 75 percent of larger loans. Under the new plan, the government will temporarily increase the loan guarantee to 90 percent, inventivizing banks to lend.
This increase is intended to reduce the risk lenders face when they make loans to borrowers who cannot find credit elsewhere and ultimately give the banks more confidence to sell and make more loans.
The administration also temporarily will eliminate the upfront fees for 7(a) loans that banks charge borrowers. These fees go up to 3.75 percent for larger loans.
The 504 program guarantees up to $4 million worth of economic development projects for small businesses. Starting today, the administration temporarily will eliminate fees for lenders and borrowers on any new 504 applications. The goal is to reduce costs to both borrowers and lenders participating in the program.
The administration believes this move will decrease the cost of borrowing for small businesses and make it easier for them to get the credit they need to make new investments, the officials said.
You can take an online course on the SBA website to learn more about these loans and how they might work for your business.
Both programs are aimed getting the backbone of the American economy, small businesses, investing in their businesses and thereby stimulating the economy.