SBA-guaranteed loans down 27%

Monday, December 15, 2008

U.S. Small Business Administration's major functions include guaranteeing loans for small firms that do not qualify for traditional commercial loans.

The SBA operates programs for real-estate purchases, capital improvements, operating expenses, veteran-owned businesses and others.

It does not lend directly to borrowers. Rather, it guarantees loans made by partnering banks up to a certain dollar amount.

The amount SBA guarantees depends on the size of the loan, borrower and type of loan the bank is lending. Guarantees range from 75 percent to 85 percent. The intent is to make banks comfortable lending to businesses that may not possess good enough credit for regular loans.

Congressional leaders have pushed for changes in recent months that they say would free capital for small firms, many of which are struggling amid the credit crunch.

The downturn has taken a bite out of SBA lending figures. The number of SBA-guaranteed loans issued in Arizona for the year ending Sept. 30 fell 27 percent from 2007, to 2,022. Loan dollar amounts fell 32 percent, to $880 million.

The SBA has urged its bank partners to defer interest payments for borrowers when possible, given economic conditions.

Source: http://www.azcentral.com