Stimulus Package Reaches Main Street

On Monday, working to restart the economy's engine of job creation the Obama Administration announced that the Treasury Department would purchase up to $15 Billion in securities backed by Small Business Administration (SBA) loans in an effort to unfreeze the secondary market for SBA Loans.

This announcement is welcomed news to Lenders and Borrowers alike and a move by the Obama administration to shift the talk of the day away from the mismanagement of federal funds and scandalous behavior of business titans like AIG.

What does this mean for Lenders and Borrowers?

Increased Capital:
The bill will increase SBA lending to small businesses by allowing lenders to sell their existing loan portfolios on the secondary market and free up capital to make new loans.

Reduced Fees:
In addition to buying loans, the administration is proceeding with plans to eliminate fees for borrowers and reduce fees for lenders in its two signature small business lending programs (SBA 7(a) and 504).

Reduced Risk:
The bill allows SBA to raise its loan guarantee from the current levels to as much as 90 percent for some loans. At present, SBA can guarantee loans up to 85 percent on loans up to $150,000, and up to 75 percent on loans greater than $150,000.

Increasing the SBA guarantee percentage will encourage lenders to extend more capital to small businesses by raising the share covered by an SBA guarantee. With the risk reduced and more capital available, the Obama administration believes that lenders and borrowers to use the funds to stimulate small business growth and job creation.

Increase Accountability:
In an effort to better track the effects of the move on lending practices, the Bill requires the 21 banks that received federal stimulus funds to provide monthly figures on their small businesses lending. All other lending institutions must now report their small business-lending quarterly, instead of annually.


As new aspects of The American Recovery and Reinvestment Act emerge we will continue to examine the potential impacts on small business and commercial lending, so stay tuned for future updates.

For more information about SBA loan programs please visit: www.sba.gov or contact Adam WP Goncalves of Patrick F. Dwyer and Associates, LLC.


The content of this post is intended to provided general information only. It should not be used as advice for a specific matter, nor does its publication create an attorney-client relationship. For Legal advice on a specific matter, consult an attorney.

By: Adam Goncalves