Better Access To SBA Loans

Posted on Aug 1, 2009 :: Up Front
Posted by , Insight on Business Staff Writer

With small businesses creating eight out of every 10 new jobs, the U.S. government has launched several programs designed to help them weather the economic downturn.

The American Recovery and Reinvestment Act, which was signed into law by President Obama in February, includes several programs and tax credits designed to help keep businesses going and growing, according to Eric Ness, district director of the Small Business Administration.

“There is help out there for small businesses; I want to make that very clear,” says Ness, adding the SBA has made several changes to keep cash flowing to small businesses. Small businesses have been hit especially hard by the tightening of the credit markets following the collapse of the banking industry last fall.

For example, the SBA has temporarily eliminated its loan fees and raised its guarantee limits up to 90 percent on most types of its 7(a) loans.

“The SBA is telling borrowers that if this business can’t pay back the loan, we’ll take care of 90 percent of it to help ease worries and increase confidence, which hopefully will spur more borrowing to our businesses,” Ness says.

Ness recently joined other business experts and U.S. Rep. Steve Kagen, D-Appleton, at a workshop sponsored by the New North Small Business and Entrepreneurial Committee to help area residents navigate and understand how the stimulus package can help their businesses.

The nation’s economic recovery will be slow, but it will happen, Kagen says. “Our economic growth is going to come from our small businesses,” he says.

Kagen has formed a Congressional caucus of small business owners to make sure their voices are heard in key legislative matters, such as the overhaul of health insurance. Kagen pointed out that before joining Congress in 2006, he was an allergist and owner of several clinics so he “understands how hard it is to be a small business owner and the challenges you are all facing.”

In addition to waiving loan fees, the SBA has also launched the American Recovery Capital Loan Program, which makes loan payments on behalf of businesses for up to six months and gives the business six years to pay back the interest-free loan. In the first week the program was operating in Wisconsin (in mid-June) 11 businesses took advantage, Ness says.

“This loan program is really focused on small businesses with problems and trying to give them some breathing room and get themselves back on track,” Ness says. “By making their loan payments, we’re freeing up their cash for other things, such as making payroll.”

The recovery act – or stimulus package as it’s more commonly called – also allocated billions of dollars to states. Alan Fish, who heads up the Wisconsin Office of Recovery & Reinvestment created by Gov. Jim Doyle to monitor and manage the $9 billion allotted to Wisconsin, says one-third of the funds went directly to taxpayers through their paychecks and another one-third went to the state stabilization fund, which then gave funds to schools and the Medicaid program. The remaining one-third is allotted among 130 different programs that businesses can apply for. A full listing of the different grants and programs available are at

For example, funds are set aside for weatherization programs, which spurred growth for door and window manufacturers, says Fish, who is also the associate vice chancellor for facilities planning and management at the University of Wisconsin-Madison.

“There’s no silver bullet here that will magically get the economy humming again. There are a lot of little steps being taken to help businesses,” he says.

Some of those little steps include tax incentives designed to help small businesses increase their cash flow and encourage the purchase of fixed assets by the end of 2009, says Jim Olson, a shareholder at Schenck Business Solutions in Green Bay.

“A business can write off the entire amount of a purchase, up to $250,000. On top of that, there’s a bonus depreciation of 50 percent above the $250,000,” he says.

The stimulus package also enables small businesses with a net operating loss in 2008 to offset this loss against income earned in up to five prior years. Typically, a net operating loss can be carried back for only two years.

“We have done quite a few of the amended returns so businesses are getting some money back. All of this is designed to increase cash flow so businesses have money to spend and keep growing,” Olson says.

Schenck, which has nine offices across eastern Wisconsin, has also launched a financial crisis response team to help businesses in need, Olson says. “There are a lot of innovative ways out there that businesses can be helped,” he says.

The SBA’s Ness says the stimulus bill also poured $50 million into its micro-lending program, which provides small loans to entrepreneurs and small businesses just getting off the ground.

“Small businesses are the ones generating jobs and they can’t keep doing that if they don’t have money to borrow. All of these programs encourage lenders to [lend] funds to small businesses and help turn the economy around,” he says.