By: Albero G. Alvarado
May 28, 2009 marks 100 days since the American Reinvestment and Recovery Act was signed into law by President Obama.
The key question heard since then from small business owners is how does the money authorized by the President signing the Stimulus Bill/Recovery Act get to me as a business owner or employee signing the front or back of checks come payday? The answer is not simple and warrants repeating and further explanation during these challenging times, so let me give it a try.
The Recovery Act is designed to foster entrepreneurship and job creation through a comprehensive package of tax breaks, financial assistance, market incentives and funding for infrastructure improvements. These fiscal tools have now been at our disposal for 100 days and are being utilized by consumers, producers, lenders, government officials and everyone in between, sometimes even without knowing it. For instance, the Recovery Act provided the SBA with $730 million to reach more small businesses that need help. It is tools like this that are taking dead aim to alleviate small businesses’ lack of access to credit and that have brought positive changes to our Agency’s lending and investment programs.
During this time, the Los Angeles District Office has reached out at hundreds of gatherings to local entrepreneurs to help them find business capital, augmented our technical assistance services and increased government contracting opportunities, the latter by more than 30%. For those businesses in a tight spot I would recommend that they contact our network of technical assistance providers of seven Small Business Development Centers, four chapters of the Service Corps of Retired Executives (SCORE) and four Women’s Business Centers. You can find the closest center to you at www.sba.gov.
During these times, it is important to remember that the downturn has advantages for small businesses as well as disadvantages. The disadvantages are obvious and include customers being harder to find, capital more difficult to raise and suppliers not as flexible. On the upside there are an increasing number of talented people available for hire and business space is less expensive, plus businesses that unfortunately did not prepare adequately may not make it, and that will leave less competition, more opportunities and potentially free up capital for start-ups.
For small business owners confronting these dynamic conditions the SBA can aid them in a variety of ways: through the temporary fee elimination in our 7(a) and 504 Loan Programs (which can result in a savings of $30,000 on a $1 million loan for example) and a 90 percent loan guarantee for the 7(a) Loan Program (making your lender more willing to loan), increased funding for Microloans (under $35,000) that comes with technical assistance, increased bonding guarantees (from $2 million to $5 million) for contractors, expanded leverage capability (up to three times private capital) for Small Business Investment Companies in regards to equity capital and with SBA’s newest program - the American Recovery Capital Loan. This highly anticipated deferred-payment loan of up to $35,000 is for businesses that need money to make payments on an existing debt for up to six months. This loan program is 100 percent guaranteed by the SBA (further incentivizing lenders) and the borrower begins repayment - of principal only - 12 months after the loan is fully dispersed. Also, the Recovery Act provides for our 504 Loan Program to be used not only for real estate and capital acquisitions but for restructuring and refinancing of such loans into SBA-backed 504 loans, which can provide support for expansion.
Even further behind the scenes in the Secondary Market, SBA is using Recovery Act and other tools to increase the flow of credit to small businesses. The Secondary Market is where a bank sells the guaranteed portion of an SBA-backed loan to investors for a premium and thereby refills that local bank’s reserves to lend again to other small businesses. The SBA is working to unfreeze this important market. The Department of the Treasury and the Federal Reserve are also using additional tools available through the Term Asset-Backed Securities Loan Facility (TALF) to unfreeze other credit markets that accommodate student loans, auto loans, credit card loans and SBA-backed loans. On March 16, 2009 President Obama committed $15 billion in Treasury funds to aid the SBA Secondary Market.
So it is through these and other means the Recovery Act is helping to unlock credit markets, turn around the small business sector, and therefore make it easier for small businesses come payday. No matter the economic state, the SBA’s mission and commitment remain the same – to aid, counsel and protect the interests of small businesses, and to maintain and strengthen the overall economy of our great nation.
It’s my firm belief that we will soon see better days ahead with these Recovery Act tools in the hands of our nation’s persistent and skillful small business owners.
Alberto G. Alvarado--District Director
Los Angeles District Office
330 North Brand, Suite 1200_
Glendale, CA 91203_(818) 552-3215