Senate Extends SBA Stimulus Measures
On March 2, 2010, the U.S. Senate passed a bill that includes an extension of the Small Business Administration’s stimulus provisions. The final vote was 79-19, with 21 Republicans backing the bill, and the legislation was signed into law by President Obama on March 2, 2010. The House of Representatives had passed the bill on February 25, 2010.
The bill wasn’t without opposition. Jim Bunning, a Republican senator from Kentucky, mounted the strongest attack against it, arguing that the $10 million cost of the legislation was not offset by savings elsewhere in the budget. Bunning filibustered the bill but ultimately gave in. Before he relented, Sen. Mary Landrieu, the Democratic senator from Lousiana, said Republicans had “reached a new level of obstructionism.”
The bill as passed by the Senate reauthorizes the 90 percent guaranty on the Small Business Administration’s general business loans through at least March 28 if the guaranty is not re-extended after that date. The guaranty provides a $60 million appropriation to basically eliminate borrower fees for the 504 loan program in addition to the 7(a) loan program.
The SBA loan program is often a huge advantage to small business owners who can receive an SBA loan at often a lower rate than other loans without needing the amount of credit or business history that other loans often require. The Small Business Administration does not actually make the loans but instead provides a guaranty to the bank or lending institution that provides the loan so that the loan is of lower risk to the lending institution. The guaranty allows banks to be less restrictive about both the terms of the loan and the credit standards for the borrower.
The 90 percent guaranty is increased from the usual 75 percent and allows lenders to assume less risk for loans originating from the Small Business Administration than ever before. Additionally, the reduced fees for the loan products make them increasingly more appealing to potential borrowers which has dramatically increased the total number of loans administered since 2008. Prior to the increase in guaranty and reduction of funds, the SBA’s loan program was floundering.
The bill, as signed into law on March 2, also provides stipulations to extensions for jobless benefits, Medicare payment rules, federal highway spending, rules for satellite television, and funds for other popular programs.