Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

SBA lending slips as stimulus cash dries up

chart_sba_backed_loans.top.gif By Catherine Clifford, staff reporter


NEW YORK (CNNMoney.com) -- Stimulus money helped revive the government's small business lending program after the recession threw it into a near freeze. But this quarter, as the bonus funds ran out, the program's growth again began to stall.

The SBA's flagship 7(a) lending program backed 12,123 loans totaling just shy of $3 billion in the three-month period that ended Wednesday. That's a 7% increase from the number of loans made in the same quarter last year, and a 21% jump in the total dollars lent out.

But compared to the first three months of 2010, lending pulled back quite a bit. The number of loans backed by the program fell 27% from the prior quarter, when the SBA processed 16,558 loans totaling $3.7 billion.

Volume through the quarter was noticeably choppy, and dried up in June after money for additional lending incentives ran out.

The SBA's primary lending program doesn't make direct loans; instead, it backs loans made by banks, insuring a portion of each loan against default. As part of the Recovery Act passed in February 2009, Congress set up a funding pool that let the SBA temporarily eliminate fees for its loans and increase the portion of each loan that the government guarantees to as much as 90%.

The SBA has run out of the money Congress allocated for the stimulus provisions four times: in November, February, March, and a month ago at the end of May. Each previous time, Congress allocated more cash to keep the incentives going, but in May it let them lapse.

The effect was quick and dramatic. In the 10-day period from May 21 to May 31 -- when lenders knew the funding was on the verge of running out -- the SBA processed 2,042 loans totaling $729.5 million.

After that, loans carried fees and lower guarantees. In the week of June 4 to June 11, the SBA processed 529 loans, totaling $99.2 million.

Lenders are hoping Congress will bring back the bucks. The SBA is currently running a waiting list, the Recovery Act Queue, for borrowers interested in getting a loan under the enhanced loan conditions should money become available again. The queue currently has 419 borrowers in line, requesting more than $123 million in funding.

"This is a top priority for the agency," SBA spokesman Jonathan Swain said of the agency's push to revive the stimulus incentives. "These programs have been very successful boosting the availability of credit for small businesses."

The House and the Senate have been shuffling various small business proposals back and forth, but have not yet synched up to pass any of them. In the most recent legislation, a small business jobs bill introduced in the Senate on Tuesday, the SBA's Recovery Act benefits would be extended through December of this year.

Correction: An earlier version of this story incorrectly stated the SBA's loan dollar volume in May and June. The correct figure is that the SBA processed $729.5 million loans from May 21 - May 31 and $99.2 million from June 4 - June 11.  To top of page

Questions & Answers



QHow does a florist sell more in this economy? We changed our business to designing weddings and events only, as the everyday flowers are not selling. We had to throw out too much product at the end of the week -- flowers are perishable! More
Get Answer
- The Flower Lady, Suwanee, Ga.
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.01%4.14%
15 yr fixed3.18%3.29%
5/1 ARM3.24%3.30%
30 yr refi4.01%4.14%
15 yr refi3.19%3.31%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Sponsors

Sections

The typical plan on the individual market would have a deductible of $4,100, an increase of 61%, according to a Kaiser Family Foundation report. More

The advertiser backlash to Google is growing. Major brands have halted ads on certain Google platforms after learning their promotional posts were appearing alongside extremist content. More

Your credit score plays a major role in your personal finances. The better the score, the better it is for your wallet. Here's how to help get it above the 800 mark. More