SBA Loans -- The Floodgates are Open!!

Keywords for this post:
SBA loans

Whether your business is "green" or "techy" or "stem cell", or none of the above, today's press conference with President Obama, Secretary Geithner and others was the trumpet call that we've been waiting for. In fact, one of the featured speakers was a restaurant owner from Philadelphia who had a "natural foods restaurant" (yes, coming from Philly, it was noted that this is a contradiction in terms - lol).

Here's the bottom line. Banks, especially smaller banks, cannot lend via the SBA loan program because they have no money. What they do have is a pile of SBA loans that were previously granted. They used to be able to sell those SBA guaranteed loans in the secondary market, but that market has totally dried up. So the smaller banks are stuck with the loans, and no more money to loan. It's not that the loans in their portfolios are bad. Odds are, they are pretty good. But the secondary market just doesn't exist any more.

The solution: The government is stepping in and buying up millions and millions and millions of dollars of these SBA guaranteed loans. Heck, the government guarantees them anyway, so the government might as well own them. What this effectively does is give small, community banks money on hand that they can now loan out to new businsseses via the SBA loan guarantee program. The bank can buy those loans, etc., etc., and the lending cycle begins.

The floodgates are open. Business loans will start flowing again. Hallelujah!

One of the nicest parts of this program is that it likely won't cost the government a dime. These are LOANS, not GRANTS. Loans are repaid, with interest. Historically, SBA loans have been pretty secure, and there is no reason to doubt that the current bunch aren't just as secure.

So business wins. Business owners win. Banks win. And the government wins.

It just doesn't get any better than that.