SBA Offers Changes to Flagship Loan Program

The Small Business Administration has proposed two changes to its most basic and most used loan program designed to increase capital to small firms.

The agency plans to allow banks offering the 7(a) loans to use a rate other than the prime rate when making loans. It also said loan pools sold on the secondary market could be offered at an average interest rate instead of requiring that all of the loans within a given pool have the same interest rate.

Small Business and Entrepreneurship Committee top Republican Olympia Snowe of Maine praised the SBA for proposing the two regulatory changes.

"The SBA deserves tremendous credit for its innovative effort to eliminate and modify burdensome regulations to promote capital access," Snowe said. "At a time during which credit conditions remain tight and small businesses are having difficulty obtaining the financing dollars necessary to expand their operations, we must ensure regulations are properly tailored and do not stand in the way of job creation."

However, the senator said the SBA should make further changes to its loan programs to better help small firms. She said the agency should allow the guarantee portion of large loans to be broken up and sold in separate loan pools and that the agency's lending programs should be able to use an alternative size standard when determining a small business's loan eligibility.

The SBA on Oct. 30 announced that the number of loans it backed dropped by 30 percent in 2008 and the dollar value of the loans dropped by 13 percent.

By Sharon McLoone |  November 11, 2008; 10:31 AM ET Funding
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