The swirl of frozen credit and dropping orders has put the squeeze on small businesses during the economic crunch. According to a January CNN.com article titled “Sharp drop in small business loans” the Small Business Administration (SBA) processed 57 percent less small business loans last quarter than it did in the same quarter last year. The SBA's loan program insures lenders against default for certain qualifying loans to encourage risk-adverse banks to lend to entrepreneurs, so this statistic shows how large the cutbacks have been. Has your company had trouble opening credit lines with banks or suppliers since this mess began?
I read an article yesterday that indicated some relief for smaller shops with cashflow problems could come with the stiumulus signing. Rebuilding the number of loans to small businesses is the focus of the small business provisions of the economic recovery plan that was made into law Tuesday, according to a CNN.com article titled “Stimulus: What's in it for small biz?”
The bill allows the SBA to temporarily eliminate or reduce fees for its loan guarantee program, as well as increase the percentage of loans that qualify for the program. According to the article, the act also offers “small business stabilization financing,” for companies that need quick relief. This provision gives companies money to pay back existing loans. The SBA will now be able to either issue or back-up up to $35,000 in loans and companies can use the cash to pay up to six months of payments on previous loans, according to the article. The interest on the stabilization loans will be subsidized and no payments will be due until the first of the year (read the article for all the details).
These measures seem like they could really help keep custom woodworking shops afloat that have run into financing problems. Is your shop going to take advantage of either of these new programs?
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