As part of the Stimulus Package, funds  are being provided by government to eliminate fees on loans, allowing the Small Business Administration (SBA) to guarantee 90 percent (and in some case 100 percent) of small business loans. There’s also tax-savings measures built-in: deductions for property including equipment  and the opportunity to offset income earned up to five years prior for a net operating loss in 2008.  

Great news, yes, but the opportunity isn’t reaching its intended target. At least, not now. Banks are resisting using SBA money because of the Troubled Asset Relief Program (TARP) strings that are attached. The worst one for banks: should loans default, the government gets a stake in the bank. In second place is this loan-stopper: if banks accept the money they must tacitly agree to limiting executive pay. 

Even if financial institutions don’t take SBA loans, they feel the amount of money to be made from the loan isn’t worth the risk. Like home equity loans and first-time mortgages, banks are raising requirements into the stratosphere. How many people do you know with 850 credit scores? 

Authorized in February, money has yet to flow from the America’s Recovery Capital (ARC). This is an emergency lending program offered by the SBA, which offers banks a 100% guarantee on up to $35,000 for six months lent to “viable” small businesses struggling to make payments on existing debt, including credit cards, commercial mortgages and previous loans. The SBA will fully subsidize the interest on the loans, making them essentially cost-free for borrowers.  

Another delayed program is aimed at strengthening the secondary market for SBA loans which won’t be operational until June, three months after their deadline. 

So if you’ve already renegotiated costs, cut budgets to the bone, laid off staff and begged Peter to pay Paul, the money is on its way. 

Hopefully, it won’t be a day late and a dollar short. 

Hang in there. I’ll keep you posted.