ASTA praised the Obama Administration for a set of newly-announced actions to restore confidence and liquidity to the small business lending market. In a statement, ASTA said that these actions are a positive step for small-business owners.
“These actions are a solid step in the right direction,” said Chris Russo, ASTA’s president and chair. “In these challenging economic times, many travel agents and other small business owners are facing serious difficulty in obtaining credit to grow their business or to prepare for future needs.”
As part of a $15 billion effort to restore the flow of credit to small businesses, the Treasury Department announced that it will begin to purchase securities backed by guaranteed portions of certain Small Business Administration (SBA) loans packaged on or after July 1, 2008, ASTA said. By helping to clear the backlog of existing loan-backed securities, the Administration hopes to create conditions that will make it easier for banks to originate new SBA loans.
ASTA also believes that the SBA will raise the level of federal government guarantee for loans under the section 7(a) program to 90 percent from the current 75 percent to 85 percent. “This temporary increase will reduce the risk to banks participating in the SBA’s largest loan program—a further incentive to increased lending. The SBA also announced the temporary elimination of certain loan fees. Both the fee reduction and the increased guarantee level were included in the American Recovery and Reinvestment Act—popularly known as the stimulus package—signed into law last month.”
The actions, announced by President Obama and Treasury Secretary Geithner Monday in the East Room of the White House, underscored the Administration’s concern over the recent collapse in small business lending. A typical year sees approximately $20 billion in Small Business Administration-backed loans; according to official estimates, less than $10 billion in SBA loans will be originated in 2009.
While praising the new programs, Russo also reiterated his call for a new program to allow the SBA to lend directly to small businesses on an expedited basis. A provision to create such a program was included in the House-passed version of the stimulus package, only to be stripped out shortly before final passage.