Small Business Loan Setback

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At least part of the problem with the current recession is the fact that right now it is next to impossible for small businesses to borrow money.

And many small businesses are ready, able and willing to expand, if they just had the money to help them get started. If small businesses were able to expand it would absolutely have a positive affect on the economy.

So what can be done about this?

Congress has been debating a bill that would include money to allow the Small Business Administration to guarantee up to 90% of loans made by banks and community lenders to small businesses. Most SBA loans from the past only had guarantees of 50% to 75% and they were considered riskier and less attractive to lenders. Also in the bill the SBA could waive points and other fees, reduce down payment on many loans and set up a fund to provide $30 billion to stimulate small business lending by community banks.

The House has already passed the measures but a Republican filibuster is holding it up in the Senate.

Lending to small businesses has decreased dramatically over this current recession but it has been hit especially hard since funds to support the SBA guarantees and fee reductions ran out in May.

Now the bill is on hold during the Congressional recess and nothing will be done until at least September.

Part of the hold up in the Senate came when members from both parties began to attach amendments in support of their favorite causes, including a proposed amendment by Republicans to repeal the estate tax.

Read Senate leaves credit-starved small businesses hanging.