The recession has certainly put a serious crimp in most banks’ lending, but it hasn’t hurt small community banks that partner with the Small Business Administration’s Small Business Guaranteed Loan program. Even though the volume of their lending is less than it was pre-September 2008, loans continue to be made. Encouraging banks to make loans was one of the key elements of the stimulus package known as the American Recovery and Reinvestment Act of 2009. One key ARRA enticement was raising government guarantees in case of borrower default from 75 percent to 90 percent of the loan. It worked. Even though SBA loans aren’t very profitable for small banks, the SBA makes it possible for these banks to continue to do what they do so well — serve the community’s business needs.
If you’re looking for financing, look for a bank that does SBA loans. The SBA is a great resource. Its 7(a) loan program provides the most basic and most commonly required types of loans, and it’s the program most banks use. Here’s what it covers: loans for working capital; machinery and equipment; furniture and fixtures; land and building; leasehold improvements; and in some cases, debt refinancing. Loan maturities make sense, too. Other programs cover export and trade financing, and one program, called Express, provides an SBA decision on the bank’s package within 36 hours.
Not all banks can offer all programs; so you’ll have to do the research. SBA district offices can shortcut that for you. You can find out more about them, including location and phone number, by visiting the SBA’s Web site. The SBA stimulus was a great idea and it’s been a successful program. It’s currently in the process of being renewed by Congress, a fact which may cause a slight delay in the funding of new SBA loans.
Don’t let that possible delay stop you! Get your application ready — including all of the financial information the bank and the SBA require. It’s highly likely that more funding for this program will be available in a matter of weeks. If you go through the preparation process described in my previous post, you’ll not only be ready, you’ll have data that you also can use for other loan applications.
Another SBA-administered program to encourage small business lending will soon be up and running. And just as with the 7(a) program, you’ll have to apply to banks or other lenders that offer it. You will, of course, have to provide a package of financial information. As long as you don’t wait too long to start the process, you’ll be ready.