Friday, January 15, 2010

SBA Recovery Act Loan Programs Continue to Gather Steam

As previously discussed in this blog, The American Recovery and Reinvestment Act of 2009 (Recovery Act). The Recovery Act contained a number of provisions intended to spur small business lending through SBA loan programs. In November 2009, the SBA began running out of funds for the program, and began preparations to dismantle the Recovery Act programs. Luckily, on December 19, 2009 President Obama provided an additional $4.5 billion in funding for the 7(a) and 504 loan programs which provides payment of certain loan fees and higher SBA 7(a) guarantees.

Due to uncertainty regarding continued funding for the SBA Recovery Act programs, banks and small businesses rushed to complete loan applications in November. As shown in Exhibit 1, this increased volume resulted in a 56% increase in loan originations from October to November. However, growth in SBA loan originations has not been steady; October originations fell almost 27% from September. (Click to enlarge image)

The SBA estimates that funding will be available for Recovery Act loan activity through the end of February, 2010. When funds are close to being exhausted, the SBA will again begin to transition back to standard SBA lending programs. Hopefully, banks and borrowers will find a middle ground on credit quality standards and SBA origination volumes will continue to climb.


  1. Informative and nicely written - good article dude! Make posts on other SBA Program as well.

  2. Please tell us more about the Recovery Act loan activity. Can you tell me something about the SBA 8a Program ?