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SBA Loans Up +90%

April 17, 2010

from Kate Lister, American Express Open Forum, April 2010

The U.S. Small Business Administration (SBA) has had a tough couple of years. A combination of tighter credit standards among its authorized lenders, a lack of secondary market options for its loans, and depressed borrowers have made it tough for the them to help businesses through the credit crunch. But thanks to American Reinvestment and Recovery Act (ARRA) initiatives, the first quarter of 2010 shows weekly SBA loan volume up 90 percent over comparative weeks in 2009.

The SBA received an initial $730 million to help small businesses from ARRA last February. About half of that ($375 million) went toward increasing the guarantee on the SBA’s most popular loan programs and to waive borrower fees. The whole idea was to encourage banks to loosen the purse strings on small business lending.

The strategy seems to have worked. While SBA guaranteed loans were down 36 percent in 2009, ARRA successfully kick-started lending to such a degree that by November 2009, the funds were exhausted. Since then another $225 million has been allocated, including the latest infusion of $40 million last Friday.

About 44,000 companies received 7(a) loans in 2009. The average loan totaled $210,000. Women and minorities accounted for 15 percent and 25 percent of borrowers, respectively. About a third of the funds went to startup businesses. Microloans, a relatively new offering, averaged $12,000 each; 966 such loans were extended in 2009.

The National Association of Government Guaranteed Lenders (NAGGL) offers a peek at SBA lending activity from October 1 through March 26 of 2009 versus 2010 (their fiscal year ends September 30)*.

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