Incentives that make U.S. Small Business Administration loans more attractive are back in place, but only for a few weeks.
President Obama signed the Temporary Extension Act of 2010 into law March 9th, after the Senate passed the legislation on a 78-19 vote. The House passed the legislation – which also extends unemployment benefits, federal highway spending and other popular programs – on Feb. 25.
The legislation provides the SBA with $60 million to restore the 90 percent government guarantee on the SBA’s flagship 7(a) loans, and reduces or eliminates fees on the agency’s 7(a) and 504 loans. However, the extension only lasts through March 28.
Funding for the higher 7(a) guarantee and the fee reductions were originally included in the economic stimulus bill enacted a year ago. The 90 percent guarantee – up from the usual 75 percent guarantee – made the loans less risky for lenders, and the reduced fees made the loans more attractive for borrowers. As a result, SBA lending increased dramatically after cratering during late 2008’s credit crisis.
Congress provided the SBA with more funding in December to extend the loan breaks through Feb. 28, but the agency ran out of the money Feb. 22. The SBA established a waiting list for lenders who wanted to take advantage of the higher guarantee if more money for this break became available. As of March 2, nearly 579 loans totaling $231 million were sitting in this queue. The SBA now will begin working through this waiting list.
Obama has proposed extending the higher 7(a) loan guarantee and fee reductions through the end of the year.