SBA begs lenders to cut business borrowers some slack

October 27th, 2008, 1:00 am · 2 Comments · posted by Jan Norman, small-business columnist

Because of the current financial crisis and credit crunch, the U.S. Small Business Administration is begging lenders and certified development companies that participate in the agency’s guaranteed loan programs to work with business borrowers to avoid defaults and bankruptcies.

Many businesses face increased challenges in meeting their financial obligations as access to credit and capital has tightened. Some small businesses are struggling to make payroll or purchase essential inventory.

The SBA has sent a letter to lenders reminding that they have authority in individual cases to extend temporary payment relief for SBA borrowers that are struggling to make loan payments.

The agency also asked lenders not to call loans due merely because of changing financials such as declining equity in a home used as collateral or drop in personal credit scores.

“We recognize that small business owners are faced with challenging decisions right now,” said SBA Acting Administrator Sandy K. Baruah. “The SBA is here to help small businesses during these difficult economic times. We are encouraging our lending partners to follow suit by extending three-monhth payment deferments on their SBA guaranteed loans to qualified borrowers who need relief.”

Beyond three months, borrowers, lenders and the SBA can work on other solutions, the agency said.

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