About the Small Business Financing Act

The economy has led to the loss of millions of jobs since the recession began. Most small businesses have struggled in the economic distress, leading to many businesses having to close their doors. Politicians have struggled to find a solution to the problem, particularly for struggling small businesses.

Purpose:

The economy has lost millions of jobs since 2008, and small businesses have been unable to expand, or in many cases remain solvent, during these times. The Small Business Financing Act seeks to make loans for these businesses easier to achieve.

Key Components of the Act:

• Eased the ability of getting loans. Reduced fees, in conjunction with 90 percent government guarantee on the loans, helps add the potential for $12 billion in support for the loans.


• Targeted different population groups with the loans. In practice, rural areas, minority-owned businesses, and veteran-owned businesses all received a portion of the loan guarantees.


• Incorporated higher loan guarantees into the program, so that more small businesses could be served by the legislation. Certain businesses, governed by 7(a) and 504 of the tax code, saw their loan limits increase from $2 million to $5 million. Microloan limits were increased, permanently, from a previous limit of $35,000 to a new limit of $50,000. This is designed to help with start-up costs for small businesses, particularly in communities that were previously under-represented by such services.


• Increased the limits on the Small Business Association's express loans from a previous limit of $350,000 to a new limit of $1 million (although this provision has an expiration date of September 27, 2011).


• Bolstered the eligible small businesses that qualify for Small Business Association loans by lowering the business' net worth to $15 million and its average net income to $5 million. This increase in the alternate size standards makes more businesses eligible to take part in these loans.