On what seems to be a preventive move, the federal government has announced a loan program starting this week in order to help small businesses that are feeling the heat due to the ongoing recession.
Phillip Silva, district director for the SBA (Small Business Administration) which is currently overseeing the American Recovery Capital Loan Program said that this would aid small businesses, which are experiencing sales erosion due to the recession and are finding it difficult to pay back their financial indebtednesses.
Eligible companies are entitled for $35,000 interest free and SBA guaranteed loans for a period of five years, provided they apply to their area banks that would decide which of the two would be granted. SBA is currently paying the interest on loan costs charged by the area banks.
Around $225 million of the $700 odd billion-stimulus package bill that was passed by the Congress was meant for the payment of interest charges on loans that were granted to small enterprises nationwide by the SBA.
Co founder and publisher of Cinco Puntos Press – Bobby Byrd, an El Paso publishing house, said he eagerly waited to apply for the $35,000 loan, as this would help him to pay out on author royalties during a time of sales decline of approximate 20%.
He further adds that for small businesses this is like the bailout plan given to GM, its like a stimulus package that would help companies to grasp the situation, reflect and set a vision for the future. However, president of United Bank of Paso Del Norte, Les Parker, the biggest granter of SBA funded loans in El Paso’s believes that banks would have to lend at a loss.
The current interest rate on loans of 2% is being paid by the federal Government has reached 5.25%. He opined that although this program is meant to benefit the economy at large, the costs of lending such loans would have to be borne by the lenders hence hindering the participation of lenders in this program. Parker remarked that the loans would be granted on a case-to-case basis and that they would like to do it without having to absorb costs.
Silva has been hearing of similar concerns being expressed by a couple of bankers. He said that he would be willing to provide 100% guarantee on defaulters and as they also pay the lenders interest on the same as well and this should encourage banks to lend.
However, he said that loans have to be assessed by a bank according to its lending standards and make the business feasible in the long term. He said it has to be sensible lending not because there are provisions for lending. He added that several such companies agreed that this would be of great support to them.
Parker cautioned that small enterprises should not mistake this loan for a cure-all for the hick ups it might currently be experiencing. He said that businesses should know about their feasibility and long-term growth, as not knowing so would land them in a deeper debt.
Byrd remarked that this loan would be a great support as in recent times district schools and bookstores have reduced their orders for their books including their bilingual books that Cinco Puntos publishes. He added that it’s necessary to maintain a good rapport with writers and creative artists. Byrd opined that the loan programs would help his businesses and several other businesses to catch up with their long due bills.
