Tuesday, October 12, 2010

SBA Raises Maximum Loan Sizes

The U.S. Small Business Administration has implemented a major element of the Small Business Jobs Act: increasing maximum sizes in several of its loan programs.

“Across the country, there are small businesses owners who are in a position to take that next step to grow and create jobs, and these larger loan sizes provide another tool to help them do just that,” SBA Administrator Karen Mills said.  “Whether they’re in the start-up phase and could use a microloan or are looking to take advantage of lower real estate prices and interest rates to buy a new building to expand, SBA loans can now be an even greater resource to help entrepreneurs and small business owners get the capital they need.

“Additionally, temporarily increasing the cap on SBA Express loans from $350,000 to $1 million will allow more small businesses to take advantage of the streamlined approval process for working lines of credit and other capital they need,” Mills said.

Under the Jobs Act provisions, SBA has permanently increased 7(a) and 504 limits to $5 million from $2 million, and for manufacturers and certain energy-related projects seeking 504 loans, to $5.5 million.  The maximum for International Trade and Export Working Capital loans also has been increased to $5 million.

SBA also permanently increased microloan limits to $50,000 (from $35,000), helping larger entrepreneurs with start-up costs and small business owners in underserved communities. It also raised the limit on Export Express loans to $500,000 and made the program permanent.

The limits on SBA Express loans have been temporarily raised to $1 million for one year.  These loans offer a streamlined application process with reduced paperwork and approval often in a matter of days.  Unlike traditional 7(a) loans, SBA Express loans carry a 50 percent guarantee and can be used as revolving lines of credit – to help restock inventories and support larger revenue sales – which are particularly critical for small businesses as they emerge out of the recession.

SBA previously implemented the alternate size standard that was included in the Jobs Act. That provision expands eligibility for SBA-backed loans, increasing the alternate size standard to include small businesses with less than $15 million in net worth and $5 million in average net income.

The bill provided the agency with new funding to support an estimated $14 billion in lending to small businesses with the extension of higher guarantees and reduced fees in the top two loan programs, first implemented as part of the American Recovery and Reinvestment Act of 2009.

The Jobs Act also includes more resources to help increase lending to small businesses. The State Small Business Credit Initiative will support $15 billion in lending through local programs and the Small Business Lending Fund will provide capital to local, community banks to increase their lending to small businesses.