We’ve all felt the pinch. It’s no secret that consumers are spending less. Everyone fells the pressure. The problem really started snowballing when banks stopped lending businesses money. When we don’t have access to capital we can’t keep inventory flowing or employees running the cash registers.
You may have hoped to start an online businesses, but with the current financial belt tightening – may have decided to wait.
The new administration understands the importance of keeping small business running and have included money in the stimulus package for us.“The tax incentives and credit stimulus elements of the Recovery Act will truly help small business owners affected by the credit crunch, and will provide financing opportunities to help them create new jobs in their communities,” said Acting SBA Administrator Darryl K. Hairston.
The bill provides $730 million to SBA (Small Business Administration) and makes changes to the agency’s lending and investment programs so that they can reach more small businesses that need help.
The funding includes:
- $375 million for temporary fee reductions or eliminations on SBA loans and increased SBA guaranteed shares, up to 90 percent for certain loans
- $255 million for a new loan program to help small businesses meet existing debt payments
- $30 million for expanding SBA’s Microloan program, enough to finance up to $50 million in new lending and $24 million in technical assistance grants to microlenders
- $20 million for technology systems to streamline SBA’s lending and oversight processes
- $15 million for expanding SBA’s Surety Bond Guarantee program
- $25 million for staffing up to meet demands for new programs
- $10 million for the Office of Inspector General
Of special interest to small home based business owner, is the expansion of the ‘micro-loan’ program. This program provides small loans (up to $35,000). It includes technical assistance to start-ups, newly established or businesses who are starting to grow and need a capital infusion to fund the momentum.
The bill provides funding to increase loans from SBA to participating Microlenders by $50 million through September 30, 2010, and adds $24 million in grants. Expanding this program through the stimulus bill will help ensure these entrepreneurs are not left behind in the credit crunch.
This is great news for anyone who is looking to start-up an online business in the near future. Because our general start-up capital needs are smaller, we’ll benifit from these smaller loans. Included as part of these loans are training programs to help the new start-up business.
The maximum term allowed for a microloan is six years. However, loan terms vary according to the size of the loan, the planned use of funds, the requirements of the intermediary lender, and the needs of the small business borrower. The maximum loan amount is $35,000, however, the average loan amount is around $13,000. Interest rates vary, depending upon the intermediary lender and costs to the intermediary from the U.S. Treasury. Generally these rates will be between 8 eight percent and thirteen percent. Which will beat starting up your business using Credit Card loans with Rates anywhere from 11 percent to 24 percent.
More about the Small Business Adminstrations Micro Loan Program:http://www.sba.gov/services/financialassistance/sbaloantopics/microloans/index.html