The U.S. Small Business Administration (SBA) issued a projected rule to make clear and update the terms of many of its small business loan programs, saying it hopes the suggested changes will promote extensive use of these loans.

The recommended rule makes 32 particular changes to the SBA’s Surety Bond Guarantee Program, SBA 7(a) loan, Microloan, and 504 loan programs. It stated that the “Small Business Administration is featuring changes to some of these policies for transparency and to increase participation”.

Under the Surety Bond Guarantee Program, the Small Business Administration ensures bonds for contracts worth as much as $10 million, if a small business is otherwise rather guaranteed of finishing that agreement and requires a guarantee to get the bond, with the bond in turn required to secure the linked agreement by covering any default by the service provider.

The changes to the program proposed on Monday take in removing the requirement that the Small Business Administration authorize any change to a related contract or bond of $100,000 or even more, approving the threshold of 25% of the agreement’s value, as well as a proposed increase in the threshold for its quick bond program, increasing the agreement limit from $250,000 to $400,000.

Some preferred surety corporations that are approved to issue the bonds without specific Small Business Administration approval would also spot agency’s maximum guarantee percentage raised from 70% to 90% of bond value, in step with the 80-90% that the Small Business Administration offers for guarantees that it approves itself, expecting the turning around of a decline in the program, in line with the agency.

The Small Business Administration also stated that “over the last several years, Small Business Administration has observed a decline in the program activity due to the lower guarantee rate”.

As a response, surety firms new to the program would have to get approval from SBA before implementing a bond worth of greater than $2 million, until they’ve contributed in the program for a minimum of nine months.

Across the SBA 7(a), SBA microloan and SBA 504 loan programs,  all proposed to help establish or develop a small business, with the SBA 504 loan program, mainly designed to help nonprofits, the Small Business Administration has proposed more than a few changes meant to increase access to these loans.

It said that any owner of almost 20% or even more of that Eligible Passive Company would’ve to personally guarantee the loan, with the Small Business Administration also keeping prudence to require a guarantee from the other owners.

Small Business Financing News │ Merchant Advisors | blog
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The U.S. Small Business Administration (SBA) issued a projected rule to make clear and update the terms of many of its small business loan programs.
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