Recent changes to loan programs through the U.S. Small Business Administration are easing the financing process for Maryland entrepreneurs, and winning approval from State business leaders.
The SBA is now waiving the upfront guaranty fee and ongoing fee on category 7(a) business loans of $150,000 or less. Potentially, a small business owner obtaining a $150,000 loan could save more than $2,500 in fees. The waiver became effective on Oct. 1, 2013 and continues through Set. 30, 2014. Participating banks will continue to receive an 85 percent guaranty on 7(a) business loans. The backing of the SBA lowers the loan’s risk and acts as an incentive for participating banks to loan funds to qualifying business owners, according to the SBA.
Category 7(a) business loans are the most popular SBA loans issued by participating banks in Central Maryland, which is served by the SBA’s Baltimore District Office. In fiscal year 2013, participating banks issued 432 7(a) business loans, representing over $166 million, out of 510 total business loans with a total economic impact of over $272 million, according to the Baltimore District Office.
Find additional information on 7(a) business loans here.
The SBA is also waiving upfront fees for SBAExpress loans of $350,000 or less for veterans. These loans qualify for a 50 percent guaranty from the SBA. This benefit became effective on Jan. 1, 2014 and will continue until Sept. 30, 2014.
The Maryland Governor’s Commission on Small Business, created by Governor Martin O’Malley in 2010, applauded these waivers during its recent winter meeting.
“The SBA has really made a difference for small businesses in our State. I’m glad to see their loans become even more accessible,” said Ackneil Muldrow, chairman of the GCSB.
Edward Knox, the lead SBA lender relations specialist at the Baltimore District Office, addressed members of the GCSB on the changes, emphasizing the SBA’s ongoing partnership with the Maryland Department of Business and Economic Development.
SBA-backed loans help reduce the collateral required by small business owners in need of funding. SBA programs may reduce the risk to the business owner and the participating bank, but they do not reduce the quality of the investment, according to Knox.
He cited Baltimore-based Under Armour, now a world famous sportswear brand, as an example of a once-small business that experienced rapid growth after receiving an SBA-backed loan.
“An SBA guaranty is not used to make a bad loan good. It simply enhances an otherwise good loan,” Knox said.