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Sunday, Nov. 01, 2009

Stimulus working for small businesses

By Karen Mills

Special to The Telegraph

Last October, small businesses were hit by a worsening economy that resulted in frozen credit lines and diminished access to capital. This included a major drop in loans backed by guarantees through the U.S. Small Business Administration.

In February, President Obama took steps to address this crisis through the American Recovery and Reinvestment Act. Within weeks, the SBA activated more than half of the $730 million it received in the Recovery Act to enhance the agency’s two flagship lending programs to help get capital flowing again.

First, the SBA eliminated the loan origination fees for borrowers. This allowed small business owners to keep thousands of dollars in working capital that would have usually been spent on acquiring the loan.

To complement this, lenders benefited from some fee eliminations as well as an increased government guarantee of up to 90 percent in the SBA’s largest loan program.

Now, a little more than seven months later, the SBA’s average weekly loan volume has jumped more than 70 percent when compared with the two months preceding the stimulus. In all, the SBA has supported nearly $13 billion in lending, and September volume ($1.9 billion in gross approvals) was the highest single-month total since August 2007. In Georgia, the SBA approved 1,168 guaranteed loans to small businesses during the 2009 fiscal year. These loans injected over $480 million into the state’s small business community.

Just as importantly, these actions have brought more than 1,000 banks and credit unions back to SBA lending. This reinvigorated network has created more points of access to capital for entrepreneurs and small business owners nationwide.

As a result, small businesses across the country are in a position to do what they do best: drive economic growth and, in turn, lead us out of recession and into recovery.

For example, the new owners of Georgia School Supply in Bibb County have just received a $191,000 SBA 504 loan to purchase the building from the previous owner. Because this was a Recovery Act loan, the new owners saved over $4,000 in processing and lender fees that would have been required prior to the Recovery Act.

Moreover, this 504 loan helped save four jobs in Bibb County when the business passed on to the new ownership. The 504 loan was processed through Georgia Small Business Lender Inc., a Macon-based SBA Certified Development Company (CDC). Normally, a CDC will fund 40 percent of a 504 loan using monies guaranteed by the SBA. A private lender, in this case, Capital City Bank, provides some 50 percent of the loan, and the borrower puts up approximately 10 percent equity in the deal.

The administration has also reaffirmed its commitment to government contracting opportunities for small businesses. A few weeks ago, the president asked SBA and the U.S. Department of Commerce to lead a federal governmentwide effort to ensure that small businesses have the opportunity to compete for contracting dollars, including those in the Recovery Act.

This is a win-win. Through contracting, small businesses are able to offer innovative products and services, while creating and sustaining jobs. Federal agencies benefit from the nimble and responsive nature of small businesses, often working directly with the CEO.

Overall, each SBA loan and government contract represents another business that is surviving, finding ways to grow, and laying the foundation for U.S. competitiveness in a 21st century, global market.

The bottom line is that taxpayers received a powerful bang for their buck with the small business provisions in the Recovery Act. Money is going to the place where it is needed most and has the greatest potential to drive recovery — the hands of America’s entrepreneurs and small business owners.

Karen Mills is the Administrator of the U.S. Small Business Administration.