SBA Expands Loan Eligibility


Company’s Net Worth Less than $8.5 million? You May Qualify
More than 70,000 Additional Businesses May Be Eligible

Powersports dealers and manufacturers may have a new friend in the finance business, based upon word from the Small Business Administration Friday.

The SBA says it’s expanding the criteria for small businesses that may qualify for its largest lending program. The SBA’s announcement specifically notes that more than 70,000 additional firms—including auto and RV dealerships and suppliers— could be eligible as a result of the changes.

Automotive News has reported on its website that the program includes loans up to $2 million.

Powersports dealers and manufacturers weren’t mentioned specifically, but I assume that they would be eligible, too. I’ve checked with the SBA to see if there are any additional requirements that apply to powersports dealers and suppliers, but I don’t expect to hear from them until Monday. I’ll let you know what they say.

You may qualify for a loan under the SBA 7(a) program if the net worth of your company is less than $8.5 million and its average income after federal taxes for the last two fiscal years is not more than $3 million.

Before you get too excited, though, remember that the SBA doesn’t actually lend money. It only guarantees the loan made by your friendly local banker. So, you have to get him to approve the loan before the SBA’s recent move will do you any good. And you still have to pay back the loan; the SBA guarantee just makes it easier to get the money, in some cases.

The 7(a) loans are only available on a guaranty basis. This means the loans are provided by lenders, who choose to structure their own loans by SBA’s requirements and who receive a guaranty from SBA on a portion of this loan. The SBA does not fully guaranty 7(a) loans. The lender and SBA share the risk that a borrower may default.

Under the program, commercial lenders make and administer the loans. To participate, you would apply to a lender for your financing. The lender then may seek an SBA guaranty before the loan is made. The SBA guarantee assures your lender that the government will reimburse the lender for its loss, if you default. You still would remain obligated for the full amount due, however.

“This is just one more step we are taking to make sure small businesses have access to capital to keep their doors open and employees working during these tough economic times,” SBA Administrator Karen Mills said in the Friday announcement.

“We have seen signs that small businesses that are just outside the traditional 7(a) size standard are being shut out of the conventional lending market. This temporary change will help those businesses weather these tough times and help move our nation closer to economic recovery.”

Friday’s change means more small businesses can take advantage of benefits made possible through the Recovery Act. On March 16, the SBA implemented two key provisions of the Recovery Act that raised the guarantee on 7(a) loans to 90% and reduced fees for borrowers. Since then, the agency has seen average weekly 7(a) loan volume increase by more than 25% and new SBA loans made by nearly 450 lenders who had not made loans since October 2008.

For more information about SBA’s revisions to its small business size standards, visit SBA and click on “What’s New about Small Business Size Standards.” JD

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2 Responses to “SBA Expands Loan Eligibility”

  1. SBA Details New Loan Criteria « Dealernews Blog Says:

    […] 1, 2009, apply to motorcycle, ATV, and personal watercraft firms. This updates an earlier post  here with additional […]

  2. MerrY Says:

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