SBA & Bankers Need to Get on the Same Page

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In case you missed previous editorials regarding the U.S. Small Business Administration (SBA) here’s a recap. In June they unveiled a lending program specifically targeted to help small businesses through these challenging economic times. The America’s Recovery Capital (ARC) program was to provide emergency bridge loans as part of a stimulus package slated to save jobs and provide a cash flow answer for small firms.

(Congress allocated the ARC program $255 million which would allow about 10,000 loans of up to $35,000 each.)

However, months later no one in any local bank nor at the district level of the SBA can tell us that one single company in Oregon has received funds from this so-called stimulus package — while nearly one-third of all ARC loans made so far have been made by banks in just two states, Minnesota and Wisconsin.

ARC loan funds were designed to be used for payments of principal and interest for up to six months on existing, qualifying small business loans, capital leases and vendor loans.

At the end of six months the loan payments will be deferred for 12 months followed by a five-year period of monthly principal payments. ARC loans are 100 percent guaranteed by the SBA with the interest paid by the government for the life of the loan.

These loans were supposed to be readily accessible to small business owners who could demonstrate profitability in one of the last two years and be able to project sufficient cash flow to meet current and future loan payments over a two-year period from the date the loan is approved.

Cascade Publications Inc. was one of the company’s that applied for the ARC loan back in July.

Following an extremely tedious process we have been approved for a portion of the funding but have decided to decline the funds because of the upfront fees involved and the collateral required. We were not approved for the entire amount because the underwriter for the SBA made a judgment call on certain loan payments that could be paid by the funds (a company car and building lease payments were disallowed).

Local financial institutions that decided to assist their customers have become as frustrated as the companies who applied for them. The SBA has also demanded that banks release some of their own collateral with NO compensation and have required small local banks to invest considerable time into the application process with no compensation.  None of this is the least bit fair or equitable, which we can only assume is exactly the reverse of Congressional intent.

A recent conversation with a district representative of the SBA had this to say: the SBA is not the problem here, it’s the banks that are making it so difficult to get these loans approved.

The position of the SBA should be one of finding solutions to these small business loan packages and making them happen, not looking for ways to blame the banks for its failure.

The ARC program was intended to be straightforward and effective, with loan approvals to be made within 10 days of the application. However it has simply become a travesty to those in the small business world who have watched as billions of dollars of bailout funds have made it into the hands of corporate America and left the rest of us standing by the wayside.

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