$5 billion more in loans to small businesses

By Catherine Clifford, staff reporter


NEW YORK (CNNMoney.com) -- One stimulus program designed to get loans flowing again to the nation's small businesses worked very well, as in $5 billion well.

Lending to small businesses via two popular U.S. Small Business Administration programs rose nearly 30% in fiscal 2010, to $22 billion. The $5 billion increase translated to almost 7,000 government-backed small business loans.

As a result, "tens of thousands of small businesses have been able to get the capital they needed to not just survive the recession, but to grow and create much-needed jobs in communities all across the country," said SBA Administrator Karen Mills in a statement.

A stimulus provision passed under the Recovery Act of 2009 and later extended in the Small Business Jobs Act, which passed just a couple of weeks ago, sparked the increase in lending, Mills said.

The credit crunch hit small business harder than it did larger corporations: Fearful banks started hoarding cash during the recession, and Main Street loans were considered especially risky.

The stimulus program's "loan sweeteners" increase the guarantee on the SBA's flagship 7(a) loans to 90% from 75%. That makes banks feel more secure about making these loans: They know that if a borrower defaults, the government will reimburse them up to 90% of the amount of the loan. The SBA doesn't lend directly to small businesses; it backs loans made by banks.

The program makes loans more attractive to borrowers as well: A provision waives the fees they normally pay to get either 7(a) or 504 loans, which help small businesses buy real estate, equipment or other fixed assets.

The increased guarantee and fee reductions are nearly unanimously popular: Indeed, funding for the loan sweeteners have run out and been extended four times in fiscal year 2010, which ended in September.

Each time loan sweetener funds ran out, lending plunged, according to the SBA. Still, small businesses that hoped to get a loan with sweetened conditions got into a digital line, which the SBA dubbed the Recovery Queue. When the sweetener funds were refreshed, lending surged almost immediately.

The Small Business Jobs Act, which President Obama recently inked into law, extends the loan sweeteners through the end of 2010. In the first week after the Act was signed, the SBA approved 1,939 loans for $970 million, clearing the Recovery Queue.

The SBA was able to immediately "begin getting capital in the hands of the more than 1,900 small business owners who had been waiting, some for most of the summer," Mills said.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
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%4.03%
15 yr fixed3.12%2.97%
5/1 ARM3.11%2.99%
30 yr refi4.04%4.09%
15 yr refi3.15%3.05%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:

Sections

New York Magazine reporter Jessica Pressler, who has been caught up in controversy this past week, will not be moving on to a new job at Bloomberg News. More

Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More

Forums in dark corners of the web sell the kinds of hacks that befell Sony. More

Unilever sued Hampton Creek over its egg-free mayonnaise spread Just Mayo. But the company behind Best Foods and Hellman's mayonnaise has now dropped the lawsuit. More

The income of the top 1% jumped significantly in 2012, far outpacing inflation. Not only did this group make a larger share of the country's income, their share of total taxes also jumped from 35% to 38%. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.