The Small Business Administration is hoping that a $15 billion program, unveiled March 16, will accelerate loans to entrepreneurs and get the job-generating engine of small business back on track in the Tri-Counties.

Alberto Alvarado, acting regional administrator for the SBA, said in a telephone interview that the credit crunch has taken a big toll on the volume of government-guaranteed loans being approved by banks in the Los Angeles District, which includes Ventura and Santa Barbara counties.

Loans submitted for approval have declined from 120 to as many as 150 per week before the credit crunch to 70 and even as low as 30 per week. “We’ve seen a marked decrease,” he said.

The enhancements to the SBA program, announced by President Barack Obama, were part of the $787 billion economic stimulus package approved by Congress. The main enhancements for borrowers are a reduction of fees typically associated with getting an SBA loan.

For lenders, the incentives include an increase in the government’s guarantee level to 90 percent of a loan, up from a more typical 75 percent to 80 percent. “We want to make it more attractive for a lender to participate, not to make bad loans, but to shield its risk,” said Alvarado.

In addition, the Treasury Department has agreed to purchase as much as $15 billion in small business loans from banks as part of its TARP program, as a way to get the loans off of bank balance sheets so they can originate more loans.

One bank executive told the Business Times that while the new programs will provide more liquidity for making loans, they did not resolve the chilling effect that extremely close regulatory scrutiny is having on loan originations.  The problem, he said, is finding borrowers who can meet stringent new qualifications for loans, whether they eventually are going to be SBA-guaranteed loans or straight loans to small businesses.

Alvarado said the reduced origination fees and the increase guarantees would apply to two of the SBA’s most popular programs, so-called “7A” loans that typically are sold into the secondary market and so-called “504” loans typically made to small businesses seeking to purchase a commercial real estate property for offices, manufacturing or distribution facilities.

Also part of the package, Alvarado said, is an additional $50 million that will be available for microloans, smaller loans made to startup companies or very small businesses looking to expand. The SBA also is increasing its bonding for smaller contractors to as much as $10 million, so they can bid competitively for some of the infrastructure projects being funded through the administration’s economic recovery act.

“We talk a lot about shovel-ready projects but we want you to make sure your small business is contract ready” when requests for proposals go out from local governments or school districts, Alvarado said.

He said his office has been inundates with calls from small businesses that can’t access credit or find a bank to renew existing financial arrangements. In hardship cases, he said, the SBA is negotiating deferments of up to three months on loan payments. He said that across the country, SBA-guaranteed lending volume is down 50 percent or more.

As administration officials said on national television in the days leading up to the March 16 announcement, small businesses in the United States represent about 50 percent of the workforce and 70 percent of job growth.

A sharp decline in SBA-guaranteed loan activity is a sign that the job-generating engine of small business is sputtering. That’s part of the reason why the administration has announced that it wants the nation’s largest banks to report regularly on small-business loan activity.

Banks and other lending institutions that want more information about the new SBA initiatives can reach Natalie Orta, the SBA’s Business Development expert, at (818) 552-3291, Alvarado said.

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