Small Businesses Get New Loan Source From SBA Pilot Program

By Maria Valdez Haubrich

As the economy bumps along on the road to recovery, one fact holds true: Small businesses are still having a tough time getting financing to grow. That’s especially so for businesses in areas that are hard-hit by the lingering effects of the recession or regions that have never offered many capital sources.

Now there’s some help for those businesses in the form of a new financing option—the SBA’s new Intermediary Lending Pilot (ILP) Program, which has recently funded 20 community organizations authorized to start making loans up to $200,000 to qualifying small businesses.

Part of the Small Business Jobs Act of 2010, this three-year pilot program provides direct loans to eligible nonprofit intermediaries so they can make loans to small businesses in areas suffering from a lack of credit due to poor economic conditions or changes in the financial market.

The goal of the program is to address gaps in the credit market including:

• Lack of availability of commercial loans of $200,000 or less
• Borrowers who have declining collateral values or lower credit scores due to the economic downturn
• Commercial lenders such as banks having tighter underwriting standards, greater concerns about risk and less money to lend
• Certain populations in economically distressed areas remaining underserved

ILP loans can be used for working capital, real estate, or to buy materials, supplies and equipment. The loans are made through nonprofit intermediaries, such as Community Development Financial Institutions (CDFIs), Community Development Corporations and SBA Certified Development Companies (CDCs).

Although 20 have been chosen for this year, the ILP is seeking 20 more to join the pilot program for 2012. So far, the ILP pilot has funding to make loans in 2011 and 2012, but if funds are approved for an additional year, 20 more intermediaries will be chosen to make loans in 2013.

Visit the SBA website for a list of the first 20 ILP lenders authorized to make loans in 2011. For more information on applying for ILP and other SBA loans, contact your nearest SBA District Office, which you can find at http://www.sba.gov/about-offices-list/2.

Image by Flickr user Cliff 1066 (Creative Commons)

This entry was posted on Tuesday, August 23rd, 2011 at 6:00 am and is filed under Capital Access, Raising Capital, Small Business, small business, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed.


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