Congress Includes Small Business In Stimulus Packag1

From the National Small Business Association Weekly Advocate Congress Includes Small Business in Stimulus Package Jan 21, 2009 The two-year, $825 billion stimulus package that House Democrats plan to markup—in three separate committees: the House Ways and Means Committee, the Appropriations Committee, and the Energy and Commerce Committee—in the coming weeks, includes a number of provisions that House Democrats have deemed to be aimed at smallbusiness. NSBA had advocated for a number of these provisions. While still subject to change, the American Recovery and Reinvestment Act is expected to include $430 million for new direct small-business lending and loan-guarantee authorities. Credit subsidies and administrative fees consume $426 million of this total. NSBA has long sought a decrease in the borrower and lender fees associated with the lending vehicles of the U.S. Small Business Administration (SBA). The bill is likely to authorize the SBA to guarantee up to 95 percent of its small-business loans. NSBA had advocated for an increased guarantee, believing that it will make the SBA’s programs more attractive to lenders. The bill is expected to simplify the maximum leverage limits and aggregate investment limits required of Small Business Investment Companies. The stimulus bill also is expected to grant the SBA the authority to refinance community development loans under the 504 program and refinance existing small business loans, as well as to engage in underwriting, loan closing, funding, and servicing of small business loans. In its stimulus proposal, NSBA had joined Sens. John Kerry (DMass.) and Charles Schumer (D-N.Y.) in advocating for a temporary alteration of SBA’s policies relating to the circumstances under which the SBA would allow existing 504 borrowers to either refinance their un-guaranteed first mortgages or obtain another bank loan that SBA would agree to subordinate to the existing 504 second mortgage. The legislation is expected to address the lockdown of the secondary market for SBA loans by granting the SBA the authority to extend loans to secondary market brokerdealers for the purchase of the SBA-guaranteed portion of loans from lenders. The bill also is expected to establish the SBA Secondary Market Guarantee Authority, which will provide guarantees for pools of first lien 504 program loans that are to be sold to thirdparty investors. Although NSBA had recommended that the $3 billion of the Troubled Asset Relief Program be used to directly purchase SBA 7(a) pooled securities—which already are guaranteed by the federal government—it welcomes this effort to address the stagnation of the secondary market. The legislation also is expected to include $100 million for both the Rural BusinessCooperative Service and the Industrial Technology Service. The $100 million investment in the Rural Business-Cooperative Service will be used for grants and loans to rural small businesses and to help guarantee $2 billion in loans in these areas. The

Technology Innovation Program, which aims to accelerate research into potential breakthrough technologies, will receive $70 million of the $100 million allocated to the Industrial Technology Service. The remaining $30 million will go to the Manufacturing Extension Partnerships, which aims to expand small and mid-sized manufacturers’ access to technology. Economic Development Assistance (EDA) programs are expected to receive $250 million. Funds distributed through these programs are aimed at addressing long-tem economic distress in urban and rural areas. The funds are distributed regionally, based on formula that takes into account high unemployment or low per-capita income. The regions then evaluate competitive applications, which are judged on private investment leverage and potential for job creation. For every dollar spent though EDA, it is thought that $10 in private investment for is leveraged. © 2007 National Small Business Association