Jobs Act loan subsidy runs out, SBA queue forms

Filed under Financial, News

By Hallie Busta 

The U.S. Small Business Administration announced Monday that the $505 million subsidy provided in the Small Business Jobs Act of 2010 signed by President Obama in September has been depleted by the agency’s lending partners nationwide. And some experts are skeptical that additional stimulus funding will be provided in the future.

Since the Jobs Act, the agency approved more than $10.3 billion in federal loan guarantees, which allowed for nearly 22,000 SBA loans to small businesses totaling $12 billion in value, a record amount in a three-month period, thanks to  enhancements in the SBA’s two largest loan programs – the 7(a) and 504 programs.

By extending higher guarantees and reduced fees on commercial loans, the Jobs Act provision aimed to make capital more accessible to small businesses.

Stimulus supported $30 million in loans

From the signing of the American Reinvestment and Recovery Act in February 2009 through September 30, 2010, the SBA approved more than $22.5 billion in loan guarantees supporting more than $30 billion in actual loans, the agency said.  The loan enhancements, which increased the government guarantee to 90 percent on 7 (a) loans and reduced fees, were backed by nearly $680 million in subsidy funds, the SBA said.

Record quarterly volume

The Job Act, signed on September 27, 2010,  extended the enhancements by three months and contributed to $10.3 billion in lending.  According to the SBA, this extension “financed the highest volume in a fiscal year’s first quarter than at any time in the agency’s history.”

 Remaining requests for loans under the Jobs Act will be put into a loans queue, which, due to Congress’s extension of the loan enhancements through March 4, will allow any funds made available through loan cancellations to be reallocated to the new loans in the queue.

 What does this mean for small business owners?

 Bob Coleman, editor at Coleman Publishing, which provides industry trade media for small business bankers, says that whether a small business enters the queue or applies for other, non-Jobs Act loans depends on the opportunity cost to that business. The 90 percent government guarantee “is a great mitigator for the banks,” Coleman said.  The return to the SBA’s standard fees and guarantees now means banks are responsible for a quarter of the amount borrowed, reducing the incentive for lenders to make the loans and consequently reducing the supply of money available to small businesses, Coleman said.

Stimulus enhancements might be over

But small business owners and the banks they aim to borrow from, both of which tend to be local, community-based organizations, should not count on Congress to renewing the stimulus money supporting the SBA’s subsidy as it has six times in the past 12 months, Coleman said. “I would accept the fact that we’re not going to get any stimulus money, so I would go on as is,” he said. “With the political makeup on the Hill, it could happen, but I wouldn’t count on it.”

However, Coleman notes that SBA-backed loans are still available, only at pre-stimulus fees and guarantee levels. Deciding whether to accept a spot in the queue or apply for a non-Jobs Act loan depends on each business’s situation. “It comes down to a business decision … if the opportunity is that significant for the small business,” he said.

For information on the status of a loan in the queue, visit the SBA’s website.

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