If you’re hoping to get help from the federal Small Business Administration, your time may be running out.
In 2009 and 2010, when the recession was dragging on, the SBA made a choice: Eliminate loan fees and raise loan guarantees up to 90% for as long as possible, in an effort to get better loans to small businesses sorely in need of them. It was a good move, one that boosted confidence in the agency’s lending power and allowed the SBA to break its own record by unleashing some $60 billion in loans, small business lines of credit and more to needy small businesses across the country. That was after the program ended, too.
Lending Trending Down?
All good things come to an end, though, and there are reasons to believe the lending picture for the upcoming year is not as rosy. The SBA’s budget has been trimmed, the enticement programs are gone
Many expect that the cutback in the available SBA funds will have a “chilling effect” on banks, too:
“Banks are being required to preserve more capital. And the best way to do that is to not make loans,” says Coleman. “Without a guarantee there’s less of an incentive for banks to make loans.”
That adds up to a less than pretty picture, though, for those businesses looking for lending. Somebody’s gotta make up that slack.
The Good News
The good news, as it was, is that other lenders will step into the void. At the risk of self-promoting, Direct Capital has seen the demand for its services rise, and has met that demand. Other independent lenders and yes, some banks have filled in the void. In a time where small businesses need a ton of financing to get by, meeting that demand is a good thing.
What are your thoughts about this SBA news?