Stimulus Package for Small Businesses: Time Is Running Out!

Posted on September 23, 2009

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The Small Business Administration (SBA) set aside $375 million to eliminate loan fees on 7(a) and 504 loans. In some cases, this will increase the agency’s loan guarantee rate to 90% on 7(a) loans. Normally, SBA guarantees are 75% of a loan up to 1.5 million and 85% if the loan is less than $150,000, so the current increased percentage encourages banks willingness to lend money. (The SBA is also offering the America’s Capital Recovery Loan Program which provides interest-free, 100% guaranteed loans up to $35,000 for small businesses struggling during this particularly trying economic time. See “America’s Capital Recovery Loan Program.”)

SBA loans are especially beneficial to small businesses because the government is guaranteeing a high percentage of the loan, rendering the loan less risky for the potential lender. However, just as the cash for clunkers program ended, there is limited time to qualify for an SBA loan at this high guaranty rate. John Miller, spokesperson for the SBA, expects the program to end in November or December, leaving two months to take advantage. After that, guarantee rates will drop as much as 15%. If your company is looking to receive a small a business loan, the time is ripe to apply for one.

Wall Street Journal writer Diana Ransom outlines six ways to speed up the loan application process:

  1. Update your financials. Make sure that you can show that you can pay everyone back. Draft a marketing plan if you don’t have one already. A business plan is a must.
  2. Tap a preferred lender. Here’s a list of lenders who have already participated in the program.
  3. Ensure the right fit. Find a preferred lender that caters to your needs.
  4. Hedge your bets. Apply for a loan from various lenders. Don’t put all your eggs in one basket!
  5. Offer more back-up. Though the guarantee rate of 90% allows you to put only 10% down, offer more.
  6. Get help. Seek a business adviser or attorney.

Though these are some of the toughest times small businesses have ever had to face, there are solutions out there. You just have to know where to look and how to look. It always helps to have someone looking out for you, too.

Mike Goodrich, Goodrich Law Firm

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