The time has come to say goodbye to the 90 percent loan guarantee and reduced fees that supposedly sparked a rebound in Small Business Administration lending; though many reports have indicated small business lending has practically evaporated in spite of the stimulus package enhancements.
In a few days, the SBA will run out of the $375 million in economic stimulus funds that enabled the agency to offer these enhancements. As a result, beginning Monday, Nov. 23, borrowers will have to make a choice: They can be put on a waiting list to receive these breaks as stimulus funds become available, or they can apply for a regular SBA loan with higher fees and a lower government guarantee for the lender.
The SBA expects additional funds to become available to make loans under the stimulus provisions since not everyone who is approved for a loan will go through with it. However, loans on the stimulus waiting list run the risk of never getting funded.
As recently as Nov. 18, SBA officials said they expected to be able to make loans under the stimulus provisions into December. But loan applications surged this past week as borrowers and lenders tried to get their applications in before the stimulus money ran out.
SBA lenders, small-business groups and the Obama administration have urged Congress to find money to extend the stimulus enhancements. But Congress has to-date failed to do so.
As a result, government guarantees on 7(a) loans will revert back to the standard 75 percent for loans of more than $150,000, and 85 percent for loans of $150,000 or less. Fees on 7(a) loans and 504 loans, which are used to finance real estate, will revert to their normal levels as well.