The SBA's new small business loan programs

Small business owners have long complained about the red tape, long waits, and prohibitive collateral requirements of Small Business Administration-guaranteed loans. This spring the agency will introduce two new SBA loan programs that will funnel capital to underserved entrepreneurs directly through nonprofit microfinance organizations, says Grady Hedgespeth, director of the SBA's Office of Financial Assistance in Washington, D.C.

He spoke recently to Smart Answers columnist Karen E. Klein about the two new loans, as well as the brand-new 504 commercial mortgage refinance program and how they work. Edited excerpts of their conversation follow.

Karen E. Klein: What new loan programs is the SBA adding to its portfolio for 2011?

Grady Hedgespeth: The most exciting are our Community Advantage and Small Loan Advantage programs. They are a simpler and easier way for lenders to make smaller-dollar loans and get a full SBA guarantee of up to 85 percent.

What are the rules for these new programs?

They are open to borrowers who would regularly qualify for an SBA loan, with no geographical restrictions. The loan must be $250,000 or less.

What institutions will offer them and at what rates?

The Small Loan Advantage will be for 630 of our preferred lenders, including the largest banks, such as Wells Fargo (WFC), Bank of America (BAC), and U.S. Bank (USB), as well as regional banks.

Interest rates vary by the size of the loan, but generally they will be around prime plus 2.75 percent.

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