New SBA programs aim to boost loans of up to $250,000 to small firms

31 01 2011

L.A. Times, January 31, 2011

A small-business owner could get up to $250,000 in capital under new loan initiatives being rolled out by the federal government.

The new Community Advantage loan program to be launched this spring is geared to underserved markets, including firms less than 2 years old, small businesses in low- to moderate-income communities and those owned by veterans.

The loans will be made directly to small-business borrowers by nonprofit lenders including the Valley Economic Development Center in Van Nuys. Such groups previously were not allowed to make loans guaranteed by the federal Small Business Administration.

“It’s going to be a game changer for many of us who are trying to do lending to minority populations” said Roberto Barragan, president of the valley center, which provides business training and financing through seven offices. Loans under the new program will probably be available starting in June, he said.

Previously, the center and similar groups had to get banks to approve and issue loans to their clients, and those approvals became harder to get as banks tightened credit.

Also this spring, the SBA will launch the Small Loan Advantage program. It will allow loans of up to $250,000 too, but by larger, existing SBA lenders, especially banks. There are fewer restrictions under that program on who the loans can go to compared with Community Advantage.

The SBA, which has had a hard time getting banks to make relatively small loans, hopes to attract more lenders by guaranteeing as much as 85% of the loan amount under both programs. By comparison, the existing SBA Express loan program guarantees 50%.

Banks may not find them particularly profitable, but small loans are just what new businesses and small firms need.

The SBA unveiled the Community Express loan program as a pilot in 1999 to address that need. But most SBA-approved lenders did not participate in the program, which had a high default rate and came to be dominated by a few lenders, including two in California.

One of those California lenders, Innovative Bank of Oakland, was closed by regulators in April and had its assets taken over by Los Angeles-based Center Bank, which has no intention of continuing in the Community Express loan program, said Angie Yang, senior vice president at the bank’s holding company, Center Financial Corp.

That has left a number of California small-business development groups without a loan product for their clients that are not quite bankable. The Community Advantage loans are meant to help fill the gap.

Bigger loans might be available to small businesses under the new program because direct lenders, including CDC Small Business Finance of San Diego, probably will be able to lend more to a company than when banks call the shots.

“We are more of a cash-flow lender ourselves, so we will look at a small business that maybe doesn’t have an excess of collateral,” said Robert Villarreal, senior vice president of CDC. “We feel very comfortable with our underwriting.”

The new loan policies could be good news for small-business owners such as Jose Calero, co-owner of LapWorks Inc., a home-based business in Rancho Cucamonga. He wanted a $114,000 Community Express loan from CDC last summer to take advantage of an opportunity to expand his online laptop accessories into retail stores. But CDC was able to give him only $50,000, the maximum allowed by its partner bank, and he couldn’t get a traditional bank loan.

“If we are denied the resources and funding to help our businesses grow, then we are shooting ourselves in the foot,” said Calero, who had to pass on expanding into retail stores. “It is us, the small office, the home office, that are making a big impact today” on the economy.

// // Copyright © 2011, Los Angeles Times


SBA Announces Grants to SBDCs to Support Job Creation Programs

31 01 2011
Monday, January 24, 2011
Cecelia Taylor (202) 401-3059

WASHINGTON – The first six of a series of grants to Small Business Development Centers around the country to expand access to programs to help entrepreneurs start or grow their businesses and create jobs were announced today by Deputy Administrator Marie Johns of the U.S. Small Business Administration. These first six grants are part of $50 million in funding included in the Small Business Jobs Act of 2010 signed by the President last September.

A key provision of the Jobs Act provides separate one-time funding to the SBDCs to support job creation and retention within the small business community through in-depth business counseling and advising entrepreneurs and small business owners. SBDCs in Alaska, California (Northeastern SBDC program), Idaho, Iowa, Michigan, and South Carolina are the first to receive funding grants from the Jobs Act to expand training and business advisory services.

“The Small Business Jobs Act is the most consequential piece of legislation affecting small businesses enacted in more than a decade,” Johns said. “It provided an array of tools to help small businesses continue to drive economic growth and create jobs, including these grants to expand access to SBDCs around the country which provide valuable business counseling and technical assistance.  Whether you’re an entrepreneur working on a business plan to start your own business, or a small business owner who’s looking to take your firm to the next level and add more employees, SBDC counselors are in a position to help.”

The head of Michigan’s program, Carol Lopucki, said the grant will be a big help to that state’s Small Business and Technology Development Center and the small businesses it serves. “This Jobs Act award will allow us to bring onboard nine finance and strategy specialists to work directly with existing companies,” she said. “We are off and running.  The hiring documents started spinning the moment this hit the ground.”

Funding is allocated to each SBDC under a statutory funding formula based on state population. Additional awards to remaining SBDCs will be issued throughout the coming weeks.

The Jobs Act grants will help to cover SBDCs’ costs of aiding small businesses seeking capital and credit, federal procurement opportunities, energy efficiency audits to reduce energy bills, opportunities to export products or services to foreign customers, invest in broadband technologies, and other assistance.

The one-time-only individual funding amounts to be received by each SBDC, and the intended uses of the grant funding are as follows:

Alaska – $325,000 grant to the Alaska Small Business Development Center will allow it to:

  • expand services and training to the most rural areas of Alaska including one-on-one counseling, workshops on selected business management topics, and distance learning classrooms to reach a greater number of people;
  • hire one full-time and one part-time business adviser; and
  • purchase classroom materials to reduce costs to attendees.

California – $616,586 grant to the Northeastern California Small Business Development Center will allow it to:

  • partner with the University of Southern California Technology Transfer Center and federal Trade Adjustment Assistance (TAA) programs to help small businesses negatively impacted by foreign trade practices to develop new export markets;
  • offer SBIR and commercialization assistance to technology firms in partnership with California’s regional innovation Hub program (iHUB) and SBA’s Federal and State Technology Partnership Program (FAST);
  • add counseling expertise to assist second stage companies increase business growth;
  • add business advisers to rural service centers to reach underserved clients;
  • support a new virtual microbusiness incubator in rural San Joaquin Valley; and
  • increase small business participation in federal, state and local government procurement, with emphasis on regional opportunity for U.S. Forest Service contracting.

Idaho – $325,000 grant to the Idaho Small Business Development Center grant will allow it to:

  • focus on job creation with special emphasis on businesses that can create jobs now;
  • help the Idaho Department of Commerce to provide assistance to SBIR winners in the commercialization of their products;
  • involve college and university students in providing assistance to entrepreneurs so that the small business community is helped while students learn “real world” business issues – the first step in developing an entrepreneurial vision for college and university graduates;
  • add business advisory capacity to help companies pursuing international trade to expand their market; and
  • continue to support four of the six centers co-located with incubators in the state.

Iowa – $477,754 grant to the Iowa Small Business Development Center will allow it to:

  • establish an Office of International Trade in Des Moines to serve clients throughout the state by supporting exporters and export-ready businesses;
  • expand specialized counseling for technology commercialization at two host research institutions; and
  • hire a marketing expert to provide services to the Iowa Lead Center, the newly created Office of International Trade, and the broader network, alleviating the burden from the current SBDC regional directors and allowing them to increase direct client services.

Michigan – $1,622,560 grant to the Michigan Small Business and Technology Development Center will allow it to:

  • hire nine new finance and strategy specialists to work with the existing Manufacturing Assistant Team (MAT) and the Growth Group Team (G2) to provide no-cost counseling services to Michigan manufacturers and other industries;
  • help small manufacturers diversify into new industries and reduce their automotive reliance;
  • double the work force of high-level assistance throughout the state, and focus on small businesses in the growth phase, in strategic alignment with the state of Michigan’s initiatives.

South Carolina – $655,055 grant to the South Carolina Small Business Development Center will allow it to:

  • hire a full-time dedicated business adviser to provide tailored assistance to small business manufacturers;
  • expand veterans and military outreach activities focused on increasing awareness of the services available through the SBDC to veterans and current military personnel throughout the state;
  • expand business advisement resources to meet increased demand;
  • extend outreach in key markets;
  • increase support to companies seeking to do business with the government; and
  • increase international trade efforts.

The grants are a one-time funding intended to meet the critical need for business expansion and job creation, and are not intended to replace the core funding or the matching funds that the SBDCs require to sustain the program annually.

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