President Barack Obama announces plan to boost small-business lending

(Business Journal, March 17) Arizona small businesses received some welcome news Monday when President Barack Obama unveiled a plan to thaw the frozen credit markets. The U.S. Treasury Department will purchase up to $15 billion in securities backed by U.S. Small Business Administration loans in an effort to free up the secondary market for SBA loans.

The move is meant to increase SBA lending to small businesses by enabling lenders to sell their existing loans on the secondary market, according to the White House.

Donna Davis, CEO of the Arizona Small Business Association, called the plan “a life raft that many small businesses desperately need.”

“Access to capital has been a huge problem,” said Davis, who took the post in late January. “We are pleased that the administration is offering some relief for small businesses by easing tax burdens, infusing cash into the system, reducing loan fees and making small-business loans more attractive for banks. Small business is the backbone of this country and is the engine that drives our economy.”

Besides the secondary-market purchases, Obama announced plans for implementing SBA-related provisions included in the recently passed economic stimulus package. Beginning Monday, the SBA guarantees up to 90 percent of each 7(a) loan made by private-sector lenders, an increase from its 75 percent to 85 percent guarantee.

This higher guarantee should encourage lenders to make more SBA loans because they will have more protection against possible loan losses, according to the Obama administration.

Up-front fees on 7(a) loans that lenders pass along to borrowers will be temporarily eliminated, as will fees on 504 loans. Borrowers or lenders charged any of these fees since Feb. 17 –– the day the economic stimulus bill was signed –– will receive refunds.

For months, small businesses in Arizona have criticized national and local banks for not lending, despite public comments from bank CEOs and execs that they continue to lend.

Gerrit van Huisstede, president of Wells Fargo’s Desert Mountain region, said the bank is participating in the Treasury Department’s monthly reports, which track lending among the 20 largest financial institutions in the nation that received bailout funds or capital assistance.

The Treasury Department issued its first data survey last month, covering lending activity through the first three months of the program. Each subsequent report will reflect data from the previous month.

In hard-hit markets such as Phoenix, which rely on the real estate sector for economic growth and jobs, banks are being very selective in granting loans and generally have shunned residential real estate lending since the recession began.

However, some more good news may be around the corner.

According to a survey released Monday, nearly 60 percent of SBA lenders intend to increase lending as a result of enhancements made to the government-guaranteed loan program in the economic stimulus package.

The national survey was conducted by Terry & Associates, an executive search firm for SBA lenders.