Kent Hoover of Biz Journals writes at MSN Money that government guaranteesthe b and reduced fees that revived U.S. Small Business Administration lending are going away again, at least for a while.

The economic stimulus bill increased the SBA’s guarantee on its flagship 7(a) loans from the usual 75 percent to 90 percent, and reduced or eliminated fees on both 7(a) loans and 504 loans, which are used primarily to finance real estate. These enhancements made SBA loans less risky for lenders and less expensive for borrowers.

That’s a big reason the dollar volume of 7(a) loans this fiscal year, which began Oct. 1, is up by 87 percent from the same period a year earlier. Lending through the 504 program is up 43 percent.

On Nov. 23, the SBA ran out of the $375 million in stimulus funds that made the higher guarantee and fee reductions possible. Congress restored these enhancements Dec. 21 with $125 million in additional funding, but that money was expected to last only until Feb. 28.

In recent weeks, SBA lenders have rushed to submit their loan applications to the agency before the money ran out. The scramble accelerated Feb. 11 when Senate Majority Leader Harry Reid, D-Nev., stripped funds for another extension of the SBA loan enhancements — along with many other unrelated provisions — from the jobs bill scheduled for Senate action Feb. 22.

With the funds for the breaks running out, the SBA likely will set up a waiting list for lenders who want to get the higher guarantee and fee reductions for their loans. These loans will be processed if and when Congress makes additional funding available. More than 1,000 loans were sitting in a similar queue in December, when Congress passed its last SBA extension.

SBA lenders and small-business groups were surprised and frustrated by Reid’s decision to delay another SBA loan extension.

“We thought this was a done deal,” said Tony Wilkinson, president and CEO of the National Association of Government Guaranteed Lenders. “Everybody was on the same page.”

President Barack Obama had endorsed extending the SBA loan enhancements through the end of the year, which would have cost $354 million. The House passed the extension in December.

“This is not something that can really wait,” said Todd McCracken, president of the National Small Business Association. “It’s really important to get this resolved for the year.”

The on-again, off-again nature of these SBA lending incentives hurts efforts “to really strengthen the program and make it effective for small businesses in the long term,” he said.

SBA lending (October through January)

7(a) loans

  • FY 2008: 26,660 loans totaling $4.1BFY 2009: 11,477 loans totaling $2.4BFY 2010: 15,504 loans totaling $4.5B
    504 loans
  • FY 2008: 3,049 loans totaling $1.8BFY 2009: 1,693 loans totaling $1.0BFY 2010: 2,562 loans totaling $1.5B
    Source: Small Business Administration.

 Read more at: MSN Money