Bridge loans will help small firms pay their bills - bizjournals:

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Through the program, small businesses that are having trouble makinb payments onexisting non-SBA loans can borrowe up to $35,000, interest-free. The monegy can be used to make up to six months of paymentd of principal and intereston small-business debt ranging from mortgagesd to credit cards. Small businesses will have one year after the fina l disbursement of these bridge loans before they have to staryt payingthem back. They then will have five yearss to repaythe loans. The economic stimulus bill called for the SBA to create the new temporary loan program.
The agency will guarantede 100 percent of the amountt ofthese America’s Recoveryg Capital loans, which will be made throughh its network of private-sectof lenders. SBA Administrator Karen Mills said the agency will provide guidance to lenders on the ARC programm byJune 8, and will beginn accepting loan packages from lenderw June 15. “We expect these loansw to be in high she said. Tony Wilkinson, president and CEO of the Nationakl Association of GovernmentGuaranteed Lenders, estimates the approximatel y $350 million in loans that will be available through the progra will be used up “ratherf quickly,” perhaps in threr months.
Lenders, however, still are awaiting crucial detailzs onthe program, he said. Only “viable” small businesseds will be eligible to receivsethe loans, for example, and the SBA hasn’t definee viable yet. Plus, the SBA will be subsidizing the interesty onthe loans, and the agency has not told lendersw what interest rate they can charge. The SBA will provided these details to lendersJune 8, Mills In general, she said, viable small businesses are firms with a track record of succesd that are experiencing temporary difficulties, such as declining sales, due to the economicc downturn.
They also must present a plan demonstratinhg they will be able to sustain themselves once they have used up theemergencyg loan, she said. Lenders that currently do not participatr inthe SBA’s government-guaranteed loan programs will be givej the opportunity to do so. This will enabl them to help borrowers who are behind on theidloan payments, and turn past-due loans into loans that are The head of the House Smallk Business Committee wants the Obama administration to help smal businesses in the automobile industry’s supply chai n as part of its restructuringy efforts. “Little has been done to help smalol suppliers,” said Rep.
Nydia Velazquez, “That’s a big mistake. Cutting entrepreneurs out of the procesws means more setbacks downthe road, especially considering the end goal of thesed measures — job More than 600,000 Americans work for auto industry suppliers, but that numbetr is dropping on an almost daily basis. The auto industry’ss restructuring “needs to be deep enough and comprehensive enougn to reachsmall businesses,” Velazquez said. The Treasury Departmenyt has createda $5 billion program to help direc t suppliers of finished products to General Motorw and Chrysler by guaranteeing their receivables.
But second- and third-tief auto industry suppliers, who sell equipment and raw materials todirect suppliers, aren’tr eligible for this program. Many smallp businesses in the auto industry already have been forces to lay off workers due to the downturnb inautomobile production, according to executives from smalpl suppliers who testified before Velazquez’s committee last Many now are worried they won’t get paid for producte they have already delivered due to Chrysler’sz bankruptcy filing and the likelihooc that General Motors will follow suit.
The Small Businesse Administrationis “carefully calibrating a plan” to provid e automobile dealers with loans for purchasing vehicle inventory, SBA Administratoer Karen Mills said. Auto dealers already have benefitedf fromthe SBA’s decision to make more than 70,000 additional businesses eligible for its 7(a) loans. The agency temporarily is allowint lenders to considera company’s net worth and annua income as an alternative to its usuakl size standards, which are based on revenues or number of employees, dependingb on industry.
These 7(a) loanxs will provide needed working capital, but auto dealers say they’rde also having trouble getting “floor plan” loans, which are needef to buy vehicles from auto manufacturers for sale to the Mills said the SBA will beginb allowingits government-guaranteed loans to be used for vehicle inventoryy financing in a few weeks. The Departmeng of Housing and Urbah Development has decided toallow first-time home buyers to use the $8,00p tax credit included in the economic stimulus bill as a down paymengt on their mortgages.
Home builderss and Realtors said the decision shoulx provide a boost to the housing since first-time buyers won’t have to wait until they file theirr taxes in order to benefit from the “The biggest obstacle for first-time buyers is comingh up with a down payment,” said Joe a home builder from Tulsa, Okla., who chair s the National Association of Home Robson praised HUD Secretary Shaun Donovan for “moving swiftly to help first-time home buyerd to access the tax credit upfront at the time of The timing could not have been bette as we are in the midst of the crucial spring home-buyingh season.
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