Small business lenders will have FAME guarantees.
AUGUSTA – A state agency has stepped in to back loans for small businesses while the federal government gets its fiscal house in order.
The 7(a) loan program administered by the Small Business Administration has been suspended by the federal government because it ran out of money. The program provides loan guarantees for small business owners who are seeking commercial loans.
In 2003, 407 loans totaling more than $10 million in 7(a) guarantees were made in Maine. “It is a significant program,” said Bonnie Erickson, public information officer for the Maine SBA.
The Finance Administration of Maine has agreed to back the loans until the federal government resolves the SBA budget. Charlie Spies, CEO of FAME, said the state agency should be able to handle the volume of loan guarantee requests until the SBA is back on its feet. FAME also provides guarantees to commercial banks for small business loans in a similar state-run program.
“Our program tends to be a little more flexible in terms of local issues,” said Spies. “The SBA works well for banks that do business across state lines because as a federal program, the paperwork is the same across the borders.”
Spies said he hopes some minor staff adjustments will allow FAME to process the 7(a) requests quickly.
The 7(a) program guarantees between 50 and 85 percent of a commercial bank loan. It’s the most popular loan program administered by the SBA, in Maine and nationally.
“Without 7(a), small business owners would have restricted access to capital, not only for start-ups, but for expansions as well,” said Doug Heye, spokesman for the SBA in Washington, D.C. “With the economic recovery happening, we want to be able to help small business continue to grow.”
The SBA’s request for $16 billion to fund 7(a) was approved by the Senate, but it was cut to $9 billion by the Appropriations Committee.
Heye said there are some temporary measures under negotiation to restore partial funding to the 7(a) program, including a $470 million transfer from another federal agency.
Sen. Olympia Snowe, who chairs the Senate Committee on Small Business and Entrepreneurship, has been meeting with SBA Administrator Hector V. Barreto to resolve the funding situation. She is also considering proposals to prevent this shortfall from happening again.
“I am disappointed by the administration’s decision to suspend 7(a) lending, which plays such a large role in providing basic operating and expansion capital to our small businesses,” she said in a statement.
“This is a highly unusual move that could create a hardship for thousands of independent and family owned firms, particularly in Maine where small businesses account for virtually every new job created.”
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