President Barack Obama earlier this week signed legislation extending benefits to small businesses under the American Recovery and Reinvestment Act.
The measure extends through March 28 the Small Business Administration’s ability to offer small business loans that include a higher guarantee level as well as a waiver of borrowers’ fees. The additional funding will support an estimated $1.8 billion in small business lending, according to the SBA.
Eligible loan approvals are expected to resume March 10. Applications from borrowers already in SBA’s Recovery Loan Queue will be funded first, followed by newer applications, the administration stated in a release.
Under the ARRA, the SBA was allocated $730 million, including $375 million to increase the SBA guarantee on 7(a) loans to 90 percent and to waive borrower fees on most 7(a) and 504 loans. The funds for those programs were exhausted Nov. 23, and an additional $125 million was provided in December. Those funds were exhausted in late February, according to the SBA.
The SBA has implemented the Recovery Loan Queue twice previously as part of its temporary transitions back to pre-ARRA lending. Eligible small businesses, in consultation with their lender, could choose to be placed in the queue for possible approval of a Recovery Act loan if funding became available from loans canceled for a variety of reasons. The queue currently contains 652 loan requests totaling $230 million.
This week’s extension authorizes the higher guarantee levels through March 28 for 7(a) loans. The fee relief is available until the additional funding is exhausted or the end of the fiscal year Sept. 30, whichever comes first. As was the case in November and again in February, the SBA announced it is prepared to transition into a queue system as the funds wind down in order to ensure the maximum stimulative effect of the programs and disbursement of funds.
The extension does not provide a retroactive guarantee or waived fees for non-ARRA 7(a) or 504 loans already funded during the transition period. Loans that were funded under non-ARRA terms cannot be canceled and resubmitted to take advantage of the ARRA extension provisions.