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SBA hopes to help businesses with $730 million in loans

23 August 2009 No Comment

By Helen Kaiao Chang

See original story on SDNN

Friday, August 21, 2009

Imagine having tons of money to lend out, but few to lend it to.

That’s the situation Ruben Garcia, the Small Business Administration’ district director of San Diego, is in.

He likens himself to a furniture or car sales person, looking to “sell” small business loans to California’s entrepreneurs.

“This is better than Jerome’s (furniture), better than a car sale,” quipped Garcia, talking about the low-cost loans available through SBA in the 2009 budget. “What a great deal.”

Garcia was speaking on a panel organized by the California Hispanic Chamber of Commerce, which is holding its annual convention in San Diego. The meeting concludes Saturday.

Organizers said some 500 participants registered for the four-day conference held at the U.S. Grant Hotel, which included appearances by Gov. Arnold Schwarzenegger, Sen. Dianne Feinstein, and state controller John Chiang.

Garcia spoke as part of the Friday panel “California’s economic recovery and business opportunities.” The panel was targeted at small business owners, who comprise a majority of the state’s businesses. Many have been hurt badly by the recession.

Garcia gave a breakdown of federal stimulus money the SBA has received for fiscal 2009, starting June 15, under the American Recovery and Capital program.

The $730 million in stimulus funds the SBA received nationally includes:

— $375 million for temporary fee reductions on SBA loans. This includes origination and processing fees. In San Diego, about two dozen businesses have applied for these fee reductions, said Garcia. For some loans, this means savings of $40,000. A company can use this savings to invest in growing their business, he said.

— $255 million for a new loan program to help small businesses pay for existing debt. This means the government pays for business-related loans up to six months past due and 12 months going forward.

The existing loans need to be for business-related expenses, but can pay for credit cards, unsecured loans, mortgages and other secured loans. “You can kick back and relax while the government pays your bills for 18 months,” joked Garcia. “Well, you’re going to be working hard on your business.”

In San Diego, several hundred businesses have applied so far, said Garcia. But since the approval process takes 30 days, only a few had been approved to date, with more yet to come.

The government guarantees these loans 100 percent, so there is no risk to banks doing the lending.

— $30 million for microloans. These are loans of less than $50,000 each used to grow a business. Many microloan applicants do not qualify for loans with traditional banks and institutions. In San Diego, these low-interest microloans are administered by ACCION San Diego and the Certified Development Companies.

While many businesses have been hurting in the current economic climate, the SBA is able to help business owners. “We actually have dollars from the federal government,” Garcia said.

Not everyone in the room was convinced. During the question and answer session, one business owner said that he had applied four times but had yet to receive an SBA loan.

Another noted that the number of banks signing up for the program was limited. Out of 89 lending institutions in San Diego, only four are participating in the American Recovery and Capital program, due to concerns that the businesses they lend to might fail.

Garcia said the banks were being overly cautious, since the government is guaranteeing the loans 100 percent. “If it fails, we’ll eat it,” said Garcia. “It’s a no-brainer.”

Cynthia Bryant, director of the California Task Force which manages the state’s Recovery Act funds, said that businesses applying for other stimulus funds do need to be certified and go through an approval process. “It is a bureaucracy,” she said.

But part of the reason is that the Obama administration demands greater transparency and accountability. Congress also wants to track the funds and their impact on jobs and economic activity, Bryant said.

The greatest obstacle for the programs, said Garcia, was simply getting the word out to business owners. That’s why he joked about feeling like a car salesman, promoting the loan programs.

But his message was serious: “There’s an opportunity to get assistance if you’re having financial difficulty,” he said.

Follow Helen on Twitter @HelenChang.

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