small business administration

On Monday Federal Reserve Chairman Ben Bernanke took up the growing issue of lack of lending to small businesses by banks, and the havoc it's causing in the economy.

Lending to small businesses contracted by $40 billion for the first quarter of 2010 as compared to 2008. Only a third to half of small businesses were able to secure a loan or line of credit in 2009.

And Small Business Administration lending all but disappeared in June, thanks to the end of a popular stimulus program.

In the middle of the federal government's National Small Business Week, two of the most successful Small Business Administration programs are about to run out of money -- again.

President Obama has been talking -- a lot -- about what Washington needs to do to help save small businesses. Over the past week, he's introduced a half-dozen different initiatives aimed at unlocking credit, creating jobs and expanding the Small Business Administration's loan programs.

Several top administration officials, including Treasury Secretary Tim Geithner and Small Business Administration head Karen Mills, will meet Wednesday with bankers, policy makers and business owners to discuss the grim state of small business lending.

More than 1,000 emergency loans have been granted to struggling companies since the Small Business Administration launched the much-anticipated America's Recovery Capital program in mid-June, according to a lending tally released this week.

While the list confirms that the program is likely to hit its goal of making 10,000 loans by the time it ends in late 2010, it also reveals that banks are still cautious about participating.

The economy is showing signs of revival, but in the small business trenches, companies are still struggling.

Sales are down, credit is tight, and the tally of laid-off workers keeps growing. Leading the federal government's effort to shore up Main Street businesses is Karen Mills, now four months into her job heading the Small Business Administration.

Despite emergency stimulus measures, small business lending continues to fall. In the just-ended quarter, the Small Business Administration's flagship program backed 30% fewer loans than it did a year ago, and 55% fewer loans than it did in 2007, before the recession set in.

Struggling small business owners can begin applying next week for an interest-free debt-relief loan through a new Small Business Administration program -- if, that is, they can find a bank to process their application.

One week before its emergency loan program is slated to launch, the Small Business Administration issued guidelines for banks and borrowers on how the new loans will work.

The Small Business Administration plans to begin dispersing funds in mid-June for a new, highly anticipated emergency lending program, but don't race off to the bank to fill out an application just yet.

Many lenders are still sitting on the sidelines, waiting for more details from the SBA before they decide whether or not to participate.