For a small business owner looking to invest and grow his or her business, or just to obtain financing to stay afloat in these times, these phrases have meant that there is little money out there for that.
While credit markets have loosened up in many parts of the country, it is still tight for small businesses in Arizona.
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It can’t be said the numbers are down for a lack of effort on the SBA’s part. On March 16, the SBA implemented two key provisions of the Recovery Act that raised the guarantee on 7(a) loans to 90 percent from 75 percent and reduced fees for borrowers. The SBA is also temporarily waiving its guaranty fee. This ranges from 2 percent to 3 ½ percent depending on the loan amount.
Additionally for small businesses in trouble, the SBA is about to roll out its new emergency loan program called the American Recovery Capital Loan Program or ARC Loans. This program offers $35,000 term loans to make six months worth of payments on existing debts such as loans, business credit cards, etc. It has a five-year maturity with first payment beginning 12 months after disbursement.
“The program is limited to $255 million in funding nationwide so Arizona small businesses must act quickly before the funds are exhausted,” Hodgman said. “The program ends on Sept. 30, 2010 but we expect the money to run out by December 2009.”
Last week, the SBA extended the definition of small business for its most popular lending program making another 70,000 businesses across the country eligible to apply for a SBA 7(1) loan.
The change, allowing businesses to qualify by net worth and average income, went into effect last week and lasts through the end of September 2010.
Small businesses must have a net worth at $8.5 million or under and must have an average net income after federal income taxes under $3 million for the previous two fiscal years.
“This is just one more step we are taking to make sure small businesses have access to capital to keep their doors open and employees working during these tough economic times,” SBA Administrator Karen Mills said. “We have seen signs that small businesses that are just outside the traditional 7(a) size standard are being shut out of the conventional lending market. This temporary change will help those businesses weather these tough times and help move our nation closer to economic recovery.”
The other end of this coin, in Arizona, is now more businesses are competing for fewer dollars. In order to get the money a business owner needs, Hodgman offers five suggestions.
• Get informed about the opportunities available to small businesses in the Recovery Act. There are some great opportunities in tax relief, contracting, and enhancements to SBA’s loan programs that make borrowing in today’s economy a smart move.
• Make sure your accounting information is up-to-date, as it will be needed when you apply for a loan such as an American Recovery Capital Loan.
• If necessary, complete any required “credit repair” to improve your chances for approval.
• Keep your ear to the ground as other opportunities may arise from new programs or legislation and our traditional method of getting the word out – print media – has been difficult with the problems the newspapers are having.
• Make sure you select the right lender for you – especially if you are seeking an ARC Loan. Not all lenders are the same and some do not offer SBA loans or do start-ups.
“We must get credit flowing again as small businesses are the lifeblood to the Arizona economy,” Hodgman said. “In 2007, SBA programs created or retained 60,000 jobs in Arizona and that number dropped to 40,000 in 2008. In 2009, we are at our lowest point in history – 7,390. This is very worrisome for us at SBA as one of our core missions is job creation.”
For more information visit www.sba.gov/localresources/district/az/index.html
Contact reporter Joe Pangburn at jpangburn@azbiz.com or (520) 295-4259.
Comments
Debra Riegner wrote on May 21, 2009 8:04 AM: