Small business loans have been an issue that many companies have followed throughout 2010 as their are many individuals who feel small business lending has been quite difficult and banks have put tighter regulations on small business loans over the recent months, which has been frustrating for some companies in need of access to capital. However, incentives from the SBA have allowed lenders to make more loans in some cases as a higher percentage of SBA loans were guaranteed throughout 2010, which was the result of funding provided by the federal government.
Yet, many businesses have been seeking ways to gain access to a small business loan quickly and new SBA programs in 2011 are hoped to address these issues as the Small Loan Advantage and Community Advantage are two new programs which are hoped to address the needs of businesses who are seeking out funding for their company. The Small Business Administration feels that these two new initiatives will increase the number of loans for companies seeking low-dollar small business loans or businesses in underserved communities.
Many businesses may need funds from a small business loan as a way to purchase equipment, use as capital, buy real estate, or simply as a way to reinvest in their company in the hopes of expanding and, in some cases, adding to their workforce. Obviously, small businesses have been called on to create much-needed jobs and lower high levels of unemployment which are wreaking havoc on the economy, housing market, and in the personal lives of consumers across the nation.
Understandably, access to small business loans will not automatically lower levels of unemployment or turn the economy around, but many feel that companies who have the potential to grow and become more profitable will ultimately push the economy and job market in the direction of recovery, if access to capital will be made available. For this reason, these new programs from the SBA are hoped to not only open borrowing opportunities for small businesses but offer an application process for their 7(a) program, which can provide loans to small companies for up to $250,000.
Reports indicate that these new loans will also offer guarantees as loans up to $150,000 will have an 85% government guarantee and a 75% guarantee for loans over $150,000. Many financial institutions are said to have been hesitant to lend unless these guarantees were in place as, obviously, many banks felt that businesses may default on these small business loans due to slow economic recovery. However, it’s felt that not only will more access to capital be granted through these new SBA initiatives, lenders will begin making more loans to businesses who may benefit, but also, the speed with which these loans may be accessed will be increased and financing will get into the hands of small business owners in a timelier manner.
Also, it’s hoped that in communities which are deemed to be underserved, some institutions like community development organizations will be able to begin offering financing opportunities to companies so that jobs may be created in small communities.
While the Community Advantage program is hope to provide a wider variety of funding opportunities and locations where companies may access these opportunities, the Small Loan Advantage Program will be available through the SBA’s Preferred Lender Program, which is said to include many of the agency’s highest volume lenders, which again, is hoped to bring more borrowing opportunities to companies and promote overall small business growth throughout 2011.