Small Business Administration increases loan volume

The Small Business Administration has increased its loan volume nationally by 40 percent, or $5.5 billion, since the federal stimulus act was approved in February.

But SBA lending in Nevada contracted rapidly in the last year.

SBA’s Nevada district counted $88 million in 262 SBA loans made by banks and other lenders during the first nine months of the current fiscal year, less than half the $209 million total for 758 loans for all of last year.

“We’re a reflection of the economy,” said John Scott, Nevada district director for the SBA.

Many small businesses use equity in their homes and home values are plunging in Southern Nevada, Scott said.

Also, the area’s tourism and gambling industry is reeling as Americans cut back on nonessentials, such as entertainment and vacations, he said.

Scott reported the loan totals for Nevada on Wednesday after hearing SBA Administrator Karen Mills discuss how the stimulus bill had helped small businesses recover despite the recession.

Mills spoke to 500 people attending a joint meeting of the Asian Chamber of Commerce, Latin Chamber of Commerce and Urban Chamber of Commerce at Paris Las Vegas.

She said President Barack Obama’s administration has been revitalizing the SBA after it languished during the last eight years under former President George Bush.

“It’s 180 degrees different,” Mills said.

During the previous administration, the SBA staff was slashed to 2,000 from 3,000 and its budget was cut 25 percent, she said.

“There was an ideological feeling that there really wasn’t a role for government, that government should be small,” Mills said of the Bush administration.

In February, Obama signed a $750 billion stimulus bill that included $730 million for Small Business Administration programs.

In addition, small businesses will be given an opportunity to be prime or subcontractors on $400 billion of “shovel-ready” stimulus projects planned for 2009, Mills said.

They include highway and bridge projects as well as the new Veterans Administration hospital in North Las Vegas.

While the Obama administration has increased the SBA staff some, Mills said most of the emphasis has been through working with affiliated organizations, such as the Senior Corps of Retired Executives, Small Business Development Centers and microloan centers for the smallest of small businesses.

To increase loans available for small business, the SBA has waived fees for many of its loan programs and increased the federal guarantee for standard SBA 7(a) loans made by banks. The SBA 7a loan guarantees were raised to 90 percent.

The SBA previously guaranteed 85 percent for loans of $150,000 or less and 75 percent of larger loans.

As a result, banks making 7(a) loans have have less at risk in case of a borrower default.

About 600 community banks have begun making SBA loans again, Mills said.

She said the SBA has introduced programs that shorten the turnaround time for SBA loans and that allow banks that only make a few SBA loans to use their own forms.

“A large number of banks we have brought back are coming because they want to lend, but they don’t have liquidity, and they are worried about their balance sheet,” she said.

Under the new America’s Recovery Capital loan program, struggling small businesses may be able to qualify for a $35,000 interest-free loan and delay payments for 12 months.

The ARC loans then are paid back over five years.

Many small businesses can use the loans to pay off high-interest credit card debt or to replace credit lines that their banks pulled.

“This is a one-time deal,” she said.

The SBA has enough money to help 10,000 businesses with ARC loans and then it will be gone.

“With these small businesses, we are going to create the jobs that are going to lead us out of this recession,” Mills said.

Sen. Harry Reid, D-Nev., who also spoke to the chambers, applauded the achievements of the Obama administration.

“In a period of three weeks, (the government) appropriated $1.2 trillion of your money,” Reid said.

He quoted a former economic aide for Sen. John McCain saying: “You do this or you’re going to have worldwide depression.”

Not since Franklin Roosevelt was president during the Great Depression has so much been accomplished during the first six months of a new presidential administration, Reid said.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.