By Michael F. Carmichael
Jan. 5, 2012
There are weeks, even months, when every day seems like Monday to some small business owners. There is a speck of light at the end of the tunnel – consumer confidence is rising, clients are starting to talk about buying more, good economic news seems to be outweighing the bad.
Except.
There’s that nagging problem of needing some additional funding to kickstart the business and get it ready to be able to meet increased client needs, or just keeping afloat until you get paid for that last client job.
That’s where a newly modified SBA-guaranteed loan program can help.
| Jeanne Hulit is the acting associate administrator for the SBA. |
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Jeanne Hulit is the acting associate administrator for the SBA. She’s been a bank lending officer in a previous life as well as being an officer in Maine’s economic development office. She not only knows that small businesses need money to grow but what makes banks need to say “approved” to a loan application.
Hulit says that speck of light at the end of the tunnel isn’t a train. “Over the last six consecutive quarters there has been an easing of small business credit standards, as reported by the Federal Reserve. We’ve seen an increase in small business lending, so we are seeing an improvement.”
The SBA has played a sizable part in that improvement. Hulit says “The SBA just came off of the highest year ever in our 50-year history of supporting credit to small businesses.”
What does that mean in terms of real money and real businesses? “We supported more than $30 billion in lending to more than 60,000 firms. We do see things going in the right direction.”
Historically, according to Hulit, banks have required all of a loan to be collateralized. For many of the small businesses Corp! has talked with this has often meant having “offsetting deposits” – keeping enough money in a bank account to equal the amount of the loan – resulting in those small business owners saying, “If I had enough money to keep in the bank I wouldn’t need the loan!”
“The SBA provides a guarantee to banks,” explains Hulit. “It enhances their underwriting when there might be a collateral shortfall, so if a small business owner doesn’t have those offsetting deposits, the SBA is a way to go. That’s our traditional lending.”
The SBA traditionally has guaranteed term loans. “Fixed principal and interest payments over an extended period of time,” Hulit says. “Because the loans are guaranteed, banks can offer a longer repayment schedule, which reduces the monthly payment.”
The newly modified CAPLines program provides an SBA guarantee for revolving lines of credit. That’s the kind of financial safety net that realizes the real world doesn’t work on the kind of structure required by term loans. According to Hulit, “As we’re coming out of this recession, one of the many things that small businesses need is working capital. They need to rebuild their inventory, their receivables are growing and they’re offering terms to their buyers so they need the working capital support for that period of time.”