ASTA Applauds Lending Plan for Small Businesses

While praising the Obama administration for new actions designed to restore confidence and liquidity in small-business lending, ASTA reiterated an earlier call for a program to allow the Small Business Administration (SBA) to lend directly to small businesses.

Nevertheless, ASTA said it was encouraged by announcements made by Obama and Treasury Secretary Tim Geithner this week regarding a $15 billion effort to restore credit to small businesses.

Treasury said it would buy securities backed by guaranteed portions of certain SBA loans packaged on or after July 1. This is designed to clear the backlog of existing loan-backed securities and thus create conditions to make it easier for banks to provide new SBA loans.

In addition, the SBA will temporarily raise the government guarantee for the loans to 90 percent from the current 75 percent to 85 percent. This reduction in risk to banks is meant as a further incentive for stepped-up lending.

The SBA also will temporarily eliminate certain loan fees. The higher guarantee level and the fee reduction were provided for in the American Recovery and Reinvestment Act, the stimulus package signed into law last month.

ASTA said that there are about $20 billion in SBA-backed loans each year, but official estimates foresee less than $10 billion in new SBA loans this year. The program that ASTA supports –direct loans from the SBA- was included in the House-passed version of the stimulus package but was cut out shortly before final passage.