Lower fees and federal guarantees designed to unlock frozen credit markets

This week Congresswoman Chellie Pingree announced changes in Small Business Administration loan programs designed to get credit flowing for new and existing businesses in Maine and across the country.

“Small businesses are the engine of economic growth,” Pingree said.  “They make up a large portion of Maine’s economy and nationally they have accounted for 7 out of every 10 jobs that have been created in the last decade.”

The changes announced this week, authorized by the economic recovery act passed by Congress, include a temporary elimination of certain loan fees and raising the SBA guarantee on some loans to 90%.

The Treasury Department is also going to buy up small business loans that are owned by community banks and other lenders, freeing them up to issue new loans.

“We need to unthaw lines of credits for small businesses,” Pingree said.  “Lowering fees makes it easier for businesses to afford the loans.  And increasing the percentage of a loan guaranteed by the government and buying up existing loans is going to make it easier for banks to lend money.”

Pingree said small businesses have come to her office looking for help with financing and these changes are likely to help some gain access to credit.

The increased guarantees apply to the SBA’s 7(a) loan program and reduced fees apply to both 7(a) loans and 504 Certified Development Company loans.  The 7(a) program represents the majority of loans the SBA guarantees. The 504 program is an economic development program generally aimed at helping existing businesses expand and requires companies to create new jobs as part of the expansion.

Pingree herself has been a small business owner for years.  She started a knitting and craft business that grew to employ up to ten year round workers. She sold that business when she ran for the Legislature and now owns an inn and restaurant in North Haven.