U.S. small businesses employ about half our nation’s workers and over the past decade have created about 70 percent of all new jobs. But their access to credit and lending markets has dried up, making it harder for small businesses to keep their doors open and their employees working. The new American Recovery and Reinvestment Act is on the way to benefit small businesses.

The ARRA contains a package of loan fee reductions, higher guarantees; new SBA programs, secondary market incentives and enhancements to current SBA programs that will help unlock credit markets and begin economic recovery for the nation’s small business sector.

ARRA will provide       $730 million to SBA and make changes to the agency’s lending and investment programs so that they can reach more small businesses that need help. Free advising or technical assistance for small business owners will continue to be made available at local Small Business Development Centers.

The stimulus bill takes a comprehensive approach and attacks several problems facing small businesses at once by reducing fees, guaranteeing a greater share of certain loans, expanding capacity in the Microloan program, providing new loans to help small businesses keep their doors open through economic hardship.

The bill allows SBA to raise its loan guarantee from the current levels to as much as 90 percent for some loans. At present, SBA can guarantee loans up to             85 percent on loans up to $150,000, and up to 75 percent on loans greater than $150,000.  Increasing the SBA guarantee percentage will encourage lenders to extend more capital to small businesses by increasing the share covered by an SBA guarantee. It will also be less expensive for a business owner to obtain SBA debt financing. The fees that they pay will be 50 percent less than in previous years.

ARRA will also expand SBA’s Microloan program, which provides small loans (up to $35,000) paired with technical assistance to start-up, newly established or growing small businesses.

Microloans $15,000 and less will continue to be unsecured. The bill provides funding to increase loans from SBA to participating Microlenders by $50 million through Sept. 30, 2010, and adds $24 million in grants to provide technical assistance to borrowers.

The Napa Valley College SBDC is an example of a local Technical Assistance Provider for the SBA Microloan program. Business Advisors at the SBDC will work with local business owners to submit an SBA Microloan and provide follow-up technical assistance.

“The significant reduction and/or elimination of SBA fees associated with SBA loans, coupled with the increase in SBA’s guarantees to banks should be a real help to both small businesses and SBA lenders,” stated Sue Jensen, VP of SBA Lending at Umpqua Bank. “SBA loans have long been a source of capital for small businesses unable to qualify for conventional credit,”  “These changes will be a win-win for our community.”

For more information on the ARRA and the benefits to small businesses and local resources, contact the Napa Valley College Small Business Development Center at 253-3210.