Despite Budget, SBA's Still Lending

October 4, 2004
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GRAND RAPIDS — People in the midst of applying for SBA loans shouldn't let news out of Washington, D.C., upset them.

According to Doris Drain, a vice president in United Bank's commercial loan department, the news in question is that there's a certain amount of uncertainty about SBA loans for the new fiscal year.

The problem is one that crops up every year. The House and Senate as of last week hadn't completed work on the new federal budget and 2004 fiscal year was to end Sept. 30.

"So there's been some uncertainty about funding levels for SBA — about whether they'll extend into the new year, whether the reduced fees will remain in effect and about whether they'll still allow piggyback loans."

But none of that, she said, should stop someone from submitting an application for a loan from the SBA's 7a Program.

"At United Bank we've been working with the SBA program for 25 years and we really believe in it," she said.

"We're not going to put anybody off," she said, "because we've seen this happen before."

As a matter of fact, Congress rarely is able to adopt a new fiscal year budget by the beginning of that fiscal year. In fact, there have been times when Congress was more than a year late in adopting its budget.

Speaking a week ago, Drain told the Business Journal that if the House and Senate miss their deadline to adopt a budget this year, they'll simply do as they have in the past and enact a continuing resolution to fund the existing program until the budget is formalized.

"You've got to understand that this (missing the fiscal year end deadline) doesn't just affect SBA," Drain said, who has been with United nearly 19 years. "It affects the funding of the whole federal government, so they will pass the resolution."

Until Congress does adopt the budget, she conceded, there is a bit of uncertainty in everyone's minds. But she also stressed that it's not enough to turn away a qualified borrower.

"Oh, it might cause a lapse of funding for a day or two," she said. "But it won't be anything meaningful. It's going to be business as usual."

Drain said she doubted if there were any significant changes in the program because of the value it has had in helping firms recover from the recession.

"It helps little businesses gear up for expansion," she said.

"And for companies that have been affected by the economy and have got a turnaround going — but are having a hard time accessing capital — SBA is a great way to be able to do that.

"Because of their extended terms," she said, "you can get permanent working capital on a seven- to 10-year term and it amortizes out just like, say, a mortgage would."    

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