Important Deadlines Near for Small Business Lending Initiatives

The Small Business Jobs Act of 2010, signed into law on September 27, 2010, contains a series of provisions designed to increase access to capital for small businesses and to provide tax breaks and other valuable resources.

Deadlines are fast approaching for important initiatives of the Small Business Jobs Act. "The new law expands and enhances a number of important Small Business Administration (SBA) programs, and offers billions more in lending support, tax cuts, and other opportunities," says Jessica Farr, the Atlanta Fed's senior community development manager for the Tennessee region. "It has the potential to put significantly more capital in the hands of entrepreneurs and small business owners."

  • The SBA began accepting applications for the 504 commercial real estate refinancing program on February 24.
  • States have until June 27 to submit their final applications for the State Small Business Credit Initiative.

More details about the act and resulting changes follow.

SBA Program Enhancements
The Small Business Jobs Act aims to increase access to capital and other opportunities for small business owners. Several important components include:

  • Increasing the maximum loan sizes for top SBA loans programs
  • Expanding the number of businesses eligible for SBA assistance
  • Providing temporary enhancements to help with working capital and commercial real estate financing
  • Promoting small business exporting
  • Increasing resources for training and counseling through the Small Business Development Centers

SBA Advantage Loan Products
The SBA is launching two new programs to increase access to capital for small business and entrepreneurs in underserved communities and to provide lower dollar loans. Both programs offer a streamlined application process for SBA 7(a) loans up to $250,000.

  • The Small Loan Advantage encourages SBA's preferred lenders to make lower-dollar loans.
  • The Community Advantage aims to increase the number of SBA 7(a) lenders who reach underserved communities, including Community Development Financial Institutions (CDFIs), Certified Development Companies, nonprofit microlending intermediaries, and other mission-driven lenders. This is a pilot program.

Small Business Lending Fund (SBLF)
The SBLF is a $30 billion fund operated by the U.S. Department of the Treasury to encourage community banks to expand small business lending.

The SBLF provides Tier 1 Capital to qualified community banks with assets of less than $10 billion and reduces the price a community bank pays for the Small Business Lending Fund as the bank makes more small business loans.

The SBLF also includes a $300 million set-aside to be invested in Community Development Financial Institution (CDFI) loan funds. Loan funds can apply for an amount up to 5 percent of their total assets and are eligible to receive equity equivalent capital at a rate of 2 percent per year for 8 years.

Additional details about the Small Business Loan Fund investments for Subchapter S corporations and CDFI loan funds will be published soon.

State Small Business Credit Initiative (SSBCI)

Final applications are due June 27.

The SSBCI is expected to help spur up to $15 billion in lending to small businesses and manufacturers that are creditworthy, but are not getting the loans they need to expand and create jobs. Specifically, the SSBCI:

  • Provides $1.5 billion to strengthen state programs that support lending to small businesses and small manufacturers; states will be required to leverage federal funds at a 10:1 ratio
  • Allows states to build on successful models for state small business programs, including collateral support programs, Capital Access Programs (CAPs) and loan guarantee programs
  • Supports existing and new state programs