Bridge loans will help small firms pay their bills - bizjournals:

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Through the program, smal businesses that are having trouble making payment s onexisting non-SBA loans can borrow up to interest-free. The money can be used to make up to six montha of payments of principapl and intereston small-business debt ranging from mortgagese to credit cards. Small businesses will have one year aftert the final disbursement of these bridge loans befored they have to start payingthem back. They then will have five yearas to repaythe loans. The economic stimulus bill calledf for the SBA to create the new temporargloan program.
The agency will guarantee 100 percent of the amount ofthese America’s Recovery Capital loans, which will be made throughb its network of private-sector lenders. SBA Administrato r Karen Mills said the agency will provid guidance to lenders on the ARC program byJune 8, and will begihn accepting loan packages from lenders June 15. “We expecy these loans to be in high she said. Tony Wilkinson, president and CEO of the Nationalk Association of GovernmentGuaranteed Lenders, estimates the approximatel y $350 million in loans that will be availablew through the program will be used up “rather quickly,” perhapa in three months.
Lenders, however, still are awaiting crucial details onthe program, he said. Only small businesses will be eligible to receivethe loans, for and the SBA hasn’t defined viable yet. the SBA will be subsidizing the interest on the and the agency has not told lendera what interest rate they can The SBA will provide these detailss to lendersJune 8, Mills said. In she said, viable small businessesd are firms with a tracjk record of success that are experiencinhgtemporary difficulties, such as declining sales, due to the economixc downturn. They also must preseng a plan demonstrating they will be able to sustain themselvesz once they have used up theemergenct loan, she said.
Lenders that currently do not participate inthe SBA’a government-guaranteed loan programs will be giveh the opportunity to do so. This will enable them to help borrowerzs who are behind on theirloan payments, and turn past-due loans into loans that are The head of the House Smalo Business Committee wants the Obama administration to help small businessesd in the automobile industry’s supply chainj as part of its restructuring “Little has been done to help small suppliers,” said Rep. Nydisa Velazquez, D-N.Y.
“That’s a big Cutting entrepreneurs out of the procesas means more setbacks downthe road, especiallgy considering the end goal of theser measures — job retention.” More than 600,000 Americans work for auto industr y suppliers, but that number is dropping on an almostf daily basis. The auto industry’se restructuring “needs to be deep enough and comprehensive enougj to reach small Velazquez said. The Treasury Department has createda $5 billionj program to help direct suppliera of finished products to General Motords and Chrysler by guaranteeing theird receivables.
But second- and third-tier auto industry who sell parts, equipment and raw materials todirect suppliers, aren’tr eligible for this program. Many smal l businesses in the auto industry already have been forced to lay off workerx due to the downturn inautomobile production, according to executiveas from small suppliers who testified beforr Velazquez’s committee last week. Many now are worried they won’t get paid for productsd they have already delivered dueto Chrysler’s bankruptcyg filing and the likelihood that Generap Motors will follow suit.
The Small Businesse Administrationis “carefully calibrating a plan” to providd automobile dealers with loans for purchasiny vehicle inventory, SBA Administrator Karejn Mills said. Auto dealers already have benefitex fromthe SBA’s decision to make more than 70,00 additional businesses eligible for its 7(a) loans. The agency temporarilyg is allowing lenders to considetra company’s net worth and annual income as an alternative to its usual size which are based on revenue or numbed of employees, depending on These 7(a) loans will provide needed workingg capital, but auto dealers say they’re also having troublde getting “floor plan” loans, which are needed to buy vehicles from auto manufacturersd for sale to the public.
Mills said the SBA will begin allowingyits government-guaranteed loans to be used for vehicle inventory financin g in a few weeks. The Department of Housing and Urban Development has decided toallow first-time home buyers to use the $8,000 tax credit included in the economi stimulus bill as a down payment on theit mortgages. Home builders and Realtors said the decision shouldd provide a boost to the housing since first-time buyers won’t have to wait untill they file their taxes in order to benefi from the credit. “The biggesyt obstacle for first-time buyers is cominb up with adown payment,” said Joe a home builder from Tulsa, Okla.
, who chairse the National Association of Home Builders. Robsoj praised HUD Secretary Shaun Donovanfor “moving swiftlyu to help first-time home buyers to accesse the tax credit upfront at the time of closing. The timing could not have been better as we are in the midst of the crucialspring home-buying season.”