President Obama Announces Recovery Act

The small business community is welcoming President Obama’s speech announcing the Recovery Act . The Small Business Administration (SBA) is immediately implementing two key provisions of the Recovery Act:

• temporarily eliminating certain loan fees
• temporarily raising guarantee levels on some of its loans.

These steps will provide lenders with the security they need in order to start lending again to the millions of small business owners desperately in need of capital.  Fees previously ranged from 2-3.75 % of the total loan package.

There are also some policy changes which will allow the Treasury to intervene on the secondary market to purchase SBA guaranteed loans.  This will help unfreeze the secondary markets for small business lending.

The Recovery Act allows the SBA to guarantee lenders up to 90% of loans instead of 75-85%. This makes it more appealing for local banks to use the guarantee because it lessens the risk. Now go out and jumpstart the economy.