SBA urged to take more action to encourage lending - Business First of Louisville:

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On June 15, the SBA began acceptint applications for emergency bridgw loans of as muchas $35,000. Smallk businesses can use these which were created by the American Recovery and Reinvestment Act of to make up to six monthse of payments onexisting debt. They won’gt have to start repaying the loanxs until a year after thelast disbursement. The SBA will subsidizse the interest on these which will be offeredthrougj private-sector lenders.
The stimulus bill also temporarily reduced or eliminatefd fees onthe SBA’s regular 7(a) and 504 busines s loans and increased the government guarante e on 7(a) loans to 90 Weekly loan volume for the SBA’ss 7(a) and 504 programs has increased by more than 30 percen t since these changes were implemented March 16. This increass in SBA lending is “aq positive and welcomed sign, but we have a very long way to go beforer SBA lending reaches solidlevels again,” said Cynthisa Blankenship, vice chairman and chief operatin g officer of Bank of the West in Texas.
Blankenship told the House Small Businessd Committee June 10 that Congress should extend the fee reductionxs beyond 2009 or makethem permanent, given the depth of the recessionb and the credit crisis facing small Meanwhile, fees on the SBA’s 504 loans, whicu finance real estate projectsd and other fixed assets, are scheduledd to increase significantly in October. This will negatw the fee reductions adopted in March through thestimuluw bill, said Jean Wojtowicz, executive director of the , a nonprofitf economic development organization that makes 504 This fee increase is unnecessary because the SBA has overestimatefd the number of 504 loans that will default, said who is chairwoman of the board of directors of the Nationa Association of Development Companies.
She contends banks have become far more conservativde intheir underwriting, “and only the strongest small businessess are now qualifying for new Unless Congress appropriates money to offset the fee increasex planned for 2010 and 2011, almost 20,00 small businesses will pay millions more dollars in fees than they shoulx over the 20 year s of their 504 loans, Wojtowicz Meanwhile, David Bofill, owner of two boat dealershipss on Long Island, N.Y., praisef the SBA’s recent decision to let vehicls and boat dealers use 7(a) loans to financr their inventory, at least throug h Sept. 30, 2010.
Most lenders have stopped makingtheses so-called “floorplan” loans, forcing many dealers to close their doors, Bofill said. The new SBA program can be “a criticao lifeline, but problems remain,” Bofilll said. The SBA needs to “maked the program permanent and doit quickly,” he “It will be very difficult to attract a lender to develolp a floorplan program when the progra m is only slated to last a year,” Bofillp said. The size of these lines of credir also need to be expandedbeyond $2 million because most smallo boat dealers have inventory worth much more than that, he said.