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SBA Hopes To Ease Burden On Small Businesses
By Bradley Vasoli, The Bulletin
The Obama administration is working through the Small Business Administration (SBA) to help more small businesses secure credit, though independent researchers view some of the newly announced policies critically.
Beginning Monday, the SBA raised its guarantees on its 7(a) loan program from 85 to 90 percent through the end of this year or until the program runs out of funds. The agency also temporarily eliminated fees on loan recipients. Altogether, these policies will cost $375 million.
Jonathan Swain, an assistant administrator at SBA, said the new policies would relieve costs to small businesses and ease banks’ anxiety about lending.
“The ultimate goal here is to help small-business owners and the best way that we can help them is to get much-needed capital in their hands,” Mr. Swain said.
President Barack Obama also announced the Treasury Department, working with the SBA, will purchase $15 billion worth of small-business loan securities, thereby allowing more smaller banks to sell SBA-backed loans to larger financial institutions. This, Mr. Swain said, will enable smaller banks to undertake more lending.
“The problem that we have right now is that the secondary market, these brokers and larger banks, don’t have any buyers,” he said.
David John, a senior fellow at the Washington, D.C.-based Heritage Foundation, said he found some of Mr. Obama’s policies worthy, although he said he differed on some details. He said he was particularly glad to learn Mr. Obama is increasing tax refunds for small businesses, but he offered only partial support to the assistance that will come through the SBA.
“I would just be happier if it was done through some way other than necessarily through SBA,” he said.
He added it concerns him banks will now have to report quarterly on the amount of money they lend to modestly sized enterprises, calling it a “step toward credit allocation” that could lead to political favoritism.
Veronique de Rugy, a research fellow at George Mason University’s Mercatus Center, however, gave no support to the increased guarantees on SBA-backed loans because she foresees many banks reacting by failing to thoroughly screen all loan applicants. That some banks have failed to do so already, she said, has created much of the current strain on credit markets.
“It’s a bad system in and of itself,” she said of the SBA. “Increasing the guarantee in this market just isn’t a good idea.”
Bradley Vasoli can be reached at bvasoli@thebulletin.us
Beginning Monday, the SBA raised its guarantees on its 7(a) loan program from 85 to 90 percent through the end of this year or until the program runs out of funds. The agency also temporarily eliminated fees on loan recipients. Altogether, these policies will cost $375 million.
Jonathan Swain, an assistant administrator at SBA, said the new policies would relieve costs to small businesses and ease banks’ anxiety about lending.
“The ultimate goal here is to help small-business owners and the best way that we can help them is to get much-needed capital in their hands,” Mr. Swain said.
President Barack Obama also announced the Treasury Department, working with the SBA, will purchase $15 billion worth of small-business loan securities, thereby allowing more smaller banks to sell SBA-backed loans to larger financial institutions. This, Mr. Swain said, will enable smaller banks to undertake more lending.
“The problem that we have right now is that the secondary market, these brokers and larger banks, don’t have any buyers,” he said.
David John, a senior fellow at the Washington, D.C.-based Heritage Foundation, said he found some of Mr. Obama’s policies worthy, although he said he differed on some details. He said he was particularly glad to learn Mr. Obama is increasing tax refunds for small businesses, but he offered only partial support to the assistance that will come through the SBA.
“I would just be happier if it was done through some way other than necessarily through SBA,” he said.
He added it concerns him banks will now have to report quarterly on the amount of money they lend to modestly sized enterprises, calling it a “step toward credit allocation” that could lead to political favoritism.
Veronique de Rugy, a research fellow at George Mason University’s Mercatus Center, however, gave no support to the increased guarantees on SBA-backed loans because she foresees many banks reacting by failing to thoroughly screen all loan applicants. That some banks have failed to do so already, she said, has created much of the current strain on credit markets.
“It’s a bad system in and of itself,” she said of the SBA. “Increasing the guarantee in this market just isn’t a good idea.”
Bradley Vasoli can be reached at bvasoli@thebulletin.us
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