The U.S. Small Business Administration has permanently altered a loan program for entrepreneurs, part of a national push to help beleaguered business owners spark economic turnaround.

The agency announced Wednesday that it would expand its popular 504 lending program to help small business owners refinance for the purposes of expanding or purchasing new equipment or supplies. Qualified borrowers will be able to refinance their current SBA loan and roll over up to half of the total cost of the purchase or pending expansion.

For example, a small business proprietor with a $500,000 SBA 504 program loan could refinance to leverage up to $250,000 for equipment or an expansion. But for every $65,000 backed by the SBA, a borrower is required to create or retain a job.

Business owners must also have kept debt payments current for at least a year.

The program’s expansion is part of the federal stimulus package enacted this spring by Congress. Federal officials hope the ability to restructure debt can help companies improve cash flow and boost job growth.

“This is one more piece of the Recovery Act that is going to have a direct impact and put more money in the hands of small business owners just when they need it most,” SBA Administrator Karen G. Mills said in a news release. “Lower interest rates mean lower payments and less money going out the door each month in debt repayments. That means more cash on hand to keep their doors open, their employees working and to even expand and create more jobs.”

Ovcrall, 504 loans are down about 41 percent this year so far, with the agency approving about 3,900 loans worth $2.28 billion. At this time last year, the SBA had already approved about 6,700 loans worth nearly $4 billion.

But the SBA’s 504 program experienced a surge in lending – up about 31 percent – in the six weeks after the stimulus package took effect. Renewed interest in the 504 program is expected to continue as borrowers look for new avenues to restructure debt or forge ahead with expansion projects.

The 504 makeover is the latest in a series of changes to SBA programs mandated by the American Recovery and Reinvestment Act of 2009. The agency’s flagship 7(a) loan program saw many of its loan guarantees jump to 90 percent. Fees have been reduced on both 504 and 7(a) loans.

The SBA also recently raised its surety bond guarantee to $5 million for construction contracts.

“All of these steps, along with other Recovery Act provisions, are aimed at increasing access to capital and giving small businesses just what they need to help lead our nation’s economic recovery,” Mills said.

Yes, as CNN Money reports, that’s a grim headline.  But, the news on the SBA loan front isn’t all bad.

One vote of confidence can be found in the increase in lending after the Stimulus Act was signed. “Comparing the months before and after the February 17 stimulus signing, the SBA reports a 24% jump in the number of 7(a) loans it has backed,”  CNN stated.

The article goes on to state that over 400 SBA-approved lenders that had not made a 7(a) loan since September have made an SBA loan since the Stimulus Act was signed.

Although the SBA stats seem weak over the past year or two, the program is making a resurgence as lenders gradually regain some confidence in the market.  To read beyond my summary, check out the full article on CNN Money.

On June 15, the SBA began it’s new micro loan program, appropriately titled “America’s Recovery Capital Loan Program.” The program was created to help small business owners pay existing debts and make meeting payroll easier.

Borrowers can get SBA guaranteed loans of up to $35,000 which can be applied to meeting short term debt obligations like mortgages, credit card payments, supplier bills, and so on.  Thes loans have 0% interest, no fees, and can be amoritized over a maximum of 5 years.

You might be wondering, what’s the catch?  Well, for borrowers there is no catch.  Lenders earn money off the interest free loans because the SBA directly pays them prime+2%.  If the borrower would happen to default, the SBA guarantee kicks in and they pick up the rest of what’s due to the bank.

Unfortunately, start up business do not qualify for the ARC Program–it’s strictly reserved for existing businesses.  Learn more and see if you might qualify by reading the SBA’s official ARC page.