On March 2, 2010, the U.S. Senate passed a bill that includes an extension of the Small Business Administration’s stimulus provisions.  The final vote was 79-19, with 21 Republicans backing the bill, and the legislation was signed into law by President Obama on March 2, 2010.  The House of Representatives had passed the bill on February 25, 2010.

The bill wasn’t without opposition. Jim Bunning, a Republican senator from Kentucky, mounted the strongest attack against it, arguing that the $10 million cost of the legislation was not offset by savings elsewhere in the budget. Bunning filibustered the bill but ultimately gave in.  Before he relented, Sen. Mary Landrieu, the Democratic senator from Lousiana, said Republicans had “reached a new level of obstructionism.”

The bill as passed by the Senate reauthorizes the 90 percent guaranty on the Small Business Administration’s general business loans through at least March 28 if the guaranty is not re-extended after that date.  The guaranty provides a $60 million appropriation to basically eliminate borrower fees for the 504 loan program in addition to the 7(a) loan program.

The SBA loan program is often a huge advantage to small business owners who can receive an SBA loan at often a lower rate than other loans without needing the amount of credit or business history that other loans often require.  The Small Business Administration does not actually make the loans but instead provides a guaranty to the bank or lending institution that provides the loan so that the loan is of lower risk to the lending institution.  The guaranty allows banks to be less restrictive about both the terms of the loan and the credit standards for the borrower.

The 90 percent guaranty is increased from the usual 75 percent and allows lenders to assume less risk for loans originating from the Small Business Administration than ever before.  Additionally, the reduced fees for the loan products make them increasingly more appealing to potential borrowers which has dramatically increased the total number of loans administered since 2008.  Prior to the increase in guaranty and reduction of funds, the SBA’s loan program was floundering.

The bill, as signed into law on March 2, also provides stipulations to extensions for jobless benefits, Medicare payment rules, federal highway spending, rules for satellite television, and funds for other popular programs.

Small businesses can breathe a sigh of relief — a much needed influx of funding to the SBA’s watershed recovery program is on the way.

Congress agreed last month to extend funding for the SBA Recovery Act through February. Part of the Obama administration’s massive economic stimulus plan, the legislation boosted funding to the agency’s two most popular loan programs. The measure met with incredible demand — small business owners grabbed about $375 million in stimulus funding, creating a shortage in capital that threatened to send loan volumes plummeting.

But legislators decided to keep the money flowing, at least for another month or so. About 1,000 small businesses were on a waiting list for close to $500 million in SBA loans.

“Small businesses have been left in limbo since the funding ran out in late November. Today’s action by the Senate will immediately clear the waiting list established by the SBA and will provide a lifeline to small businesses in need of credit,” said U.S. Sen. Mary L. Landrieu, D-La., chairwoman of the Senate Committee on Small Business and Entrepreneurship. “With these additional funds, SBA will be able to offer lenders a higher guarantee for 7(a) loans and a fee waiver on 504 loans, and reduce the cost of capital for small businesses by waiving the fees on both 7(a) and 504 loans. Reinstating these funds is important to small businesses and our overall economic recovery and job-creation efforts.”

Meanwhile, increases to the SBA’s Surety Bond Guarantee Program will extend through September. The agency is guaranteeing bonds to smaller contractors on projects worth up to $5 million — and in rare cases on public projects valued up to $10 million.

The bond guarantee covers four types of contract bonds: Bid Bonds, Payment Bonds, Performance Bonds and Ancillary Bonds. Small contractors can learn more by visiting the SBA’s Office of Surety Guarantees (OSG).