Small Business: SBA extends, enhances popular express loan program

All loan guarantee products developed by the U.S. Small Business Administration offer lenders the opportunity to apply for a federal guarantee to give them more ability and flexibility to make small-business loans to people who otherwise would not qualify.

SBA-backed loans are linked to thousands of successful companies. Some were started with this help. Some received guaranteed loans to get through downturns specific to their business; others to expand at opportune business-building times. Without SBA's federal loan guarantee program, these businesses may not have been created, may not have grown or may not have survived.

Just like any company with customers, SBA strives to make better products and increase their application in the marketplace. SBA announced to lenders July 10 that it had enhanced and expanded its already-popular SBA Express pilot Program.

The change is designed to make getting a small business loan faster and easier. I want to share this good news with potential borrowers and lenders alike, because informed borrowers can make better business decisions when considering financing options.

It is estimated from lender records that the new changes will add 2,400 lenders nationwide to the eligible list of those that can offer the SBA Express guarantee on loans to small businesses. Many of those lenders are small, rural community banks that don't typically do a lot of lending. That's all good news for the Midwest.

The new SBA Express will open participation to 488 new lenders in Region VII (Missouri, Nebraska, Kansas and Iowa.) Previously, these lenders could not meet the lending volume criteria to participate. Additionally, the enhancements should expand the use of the program by the region's SBA lenders already participating.

The prime components of the former SBA Express program, which made it attractive to the lender being in charge of determining the borrower's eligibility for an SBA guarantee and expedited loan guarantee processing by SBA remain unchanged.

SBA has now relaxed the small-business loan volume requirements that lenders previously had to meet, with the goal of enabling more of them to use the program. SBA also increased the SBA Express maximum interest rate and raised the loan ceiling to $250,000 to meet more borrowers' needs. In addition, lenders who qualify to participate in the program will be required to send just a single page of borrower eligibility information to the SBA

On the borrower's end, the SBA Express program is attractive as well. It offers less paperwork to fill out and there is less time involved in getting an answer as to whether a loan will be guaranteed. Most borrowers will be required to sign just one two-sided SBA Express loan guarantee application. The banks make all underwriting decisions. SBA receives only the information necessary to confirm the borrower's eligibility.

The enhanced and expanded SBA Express pilot program has been approved by Congress to run through Sept. 30, 2005. Should the pilot period prove that lenders can continue to make accurate and responsible lending decisions about the credit worthiness of the borrowers who use the program, as those who used the previous SBA Express program did, it is anticipated the program will be congressionally approved as a permanent loan guarantee program for the SBA.

The initial pilot SBA Express program has enjoyed wide use and acceptance by lenders, and SBA predicts the new version will be even more popular.

SBA Administrator Hector V. Barreto has set the goals of innovation, simplification and dedication as the agency refines its mission to help more of America's almost 25 million small businesses. And I believe the changes in SBA Express represent a qualitative step in achieving these goals.

It shows SBA is listening, looking at borrower and lender needs in the small-business marketplace, and responding in an innovative way. It represents the agency's dedication to small business to provide simpler, quicker and more accessible ways for small business owners to access capital, while reducing application processing time and paperwork for both borrower and lender.

If you are pursuing financing for your business, please take the opportunity to visit SBA's Web site at www.sba.gov for the location and contact information of an SBA field office closest to you. Ask about lenders who are participating in the enhanced and expanded SBA Express.