This article was written by Ben McCulloch, Chairman, SCORE Orange County
As I’m sure you’ve been following, on February 13th the Congress passed, and the President signed, the ‘American Recovery and Reinvestment Act’. Included in the Act are incentives targeted specifically for small businesses, and to be administered by the Small Business Administration (SBA). We are fortunate to be located next to the Santa Ana District Office of the SBA, and they’ve kept us up to date as this legislation has progressed.
Historic in its scope, size, and immediacy, implementing the Act will take time. Government agencies – Federal, state, and local – are familiarizing themselves with the law and gearing their processes so the new programs can be applied for and delivered. The volume of details is counterbalanced by the urgent need to stimulate the economy. In a recent meeting with the SBA, we learned it will likely take another couple of weeks to get the needed processes in-place.
Here are the key features of the Act that are targeted to small businesses:
Loan Guarantees. The SBA will be guarantee up to 90% (from 85%) for some loans. This is intended to encourage lenders to extend more capital to small businesses.
Business Stabilization Loans. A new SBA program, this will provide deferred-payment loans of up to $35,000 to viable small businesses that need the money to make payments on an existing, qualifying loan for up to six months. These loans will help ensure that small businesses have time to re-focus their business plans in order to succeed in the long run.
Microloans. Overall funding for SBA Microloans is increased. These loans provide up to $35,000 and are paired with technical assistance to start-up, newly established, or growing small businesses.
Loan Refinancing. The bill gives SBA the power to use the 504 Certified Development Company program to refinance existing loans for fixed assets, providing fresh support for small business expansion.
Surety Bonds. The bill also raises the maximum contract amount that can be covered by an SBA guaranteed surety bond from $2 million to $5 million. Small businesses need surety bonds in order to bid on and obtain many federal and other contracts. SBA guarantees surety bonds to small businesses that private surety companies would not otherwise be able to extend.
In addition to these, the Act includes a number of other provisions intended to enhance the liquidity and reduce the risk involved with small business credit markets, all of which geared towards encouraging banks to begin lending.
Interested? Tell your SCORE counselor that you need more information, and we’ll work to get it for you. Not yet counseling with SCORE? Now is a great time to start.