Caltrans And SBA Join Forces To Enable Small Business Contracting
Story from EGPnews.com

Hoping to increase the number of small businesses able to take advantage of contracting opportunities, the U.S. Small Business Administration (SBA) and the California Department of Transportation (Caltrans), Office of Civil Rights, have signed an agreement aimed at increasing small businesses access to SBA’s Surety Bond Guarantee program.

Under a Joint Bonding Assistance Initiative, SBA and Caltrans will work together to help ensure qualified small businesses can obtain the necessary bonding required on Caltrans construction contracts and subcontracts, the agencies announced earlier this week. A key component of this initiative involves the increased participation of surety companies, and surety company agents and producers in the SB Surety Bond Guarantee program. The SBA program guarantees a surety company between 70 and 90 percent of the cost incurred by the surety company in the event of a contract default.

“During these difficult economic times,” said SBA Administrator Karen G. Mills, “this kind of federal-state partnership is particularly helpful to small and emerging contractors who have seen their markets hurt by a poor economy and a lagging construction environment.”

The agreement, in the form of a Memorandum of Understanding, MOU, dovetails with the recent passage of the American Recovery and Reinvestment Act. The Act contains, among other significant programs, the largest investment in new infrastructure for the nation since the 1950s, including roads, bridges and mass transit systems, and contractors will need surety bonds to bid on the work.

The Act also raises the contract ceiling for small business bond guarantee eligibility from $2 million to $5 million, and on federal contracts, up to $10 million following certification by the contracting officer that a bond guarantee would be in the best interests of the government. By increasing the limits, Caltrans and SBA hope that more small business will be able to take advantage of contracting opportunities expected to increase due to an influx of Federal Stimulus revenue.

In a separate move, the SBA announced it would also help small businesses suffering financial hardship due to the slow economy, by providing temporary relief to keep their doors open and get their cash flow back on track through to a new loan program announced by SBA Administrator Karen G. Mills.

More Entrepreneurs Exploring Options With SBA Loans
Story from the Wichita Eagle

Slowly but surely, the impact of the federal stimulus package on small businesses and lenders is unfolding.

And the net effect so far has been a significantly increased interest in U.S. Small Business Administration-backed loans by borrowers and lenders.

Calls to the SBA's Wichita district office have increased about 50 percent, to 100 a week, since the Recovery Act became law Feb. 17, district director Wayne Bell said Friday.

Nationally, loan volume for SBA's two most popular loans is up 25 percent since mid-March. Local bankers and SBA officials don't have specific figures, but they say SBA business is on the upswing.

"We're seeing a lot more interest and getting more outside inquires," said Doug Neff, executive vice president for commercial banking at Commerce Bank.

More than half of the $730 million in the Recovery Act funding has been targeted to make it easier for small businesses to borrow.

In addition, all SBA fees that borrowers have had to pay have been eliminated through Dec. 31. Typically, those fees amount to 2 to 3 ½ percent of the loan, Bell said.

Banks have also had a renewed interest in making SBA loans after two key incentives out of the Recovery Act were announced in March:

• The SBA increased its guarantee to 90 percent from 75 percent on most loans up to $2 million.

• Maximum guarantee on surety bonds for small businesses competing for public construction and service contracts more than doubled to $5 million from $2 million.

Karen Mills, the SBA's new director, said 1,200 banks across the country have recently returned to making SBA loans and others are participating for the first time. Most of those banks are on the coasts, where there have been greater lending woes.

Local bankers and SBA officials said the Midwest and Kansas in particular didn't experience those kinds of extremes, so the swing in banks jumping on board in this area isn't nearly as great.

But Brenda Murray, a business development specialist with the SBA's Wichita office, said, "I am hearing from bankers I haven't talked to in a long time. Between the 90 percent guarantee and the surety increase, banks are motivated to look at things they wouldn't normally do."

None of the new programs has caught the attention of small business owners more than the announcement earlier this week that SBA will start guaranteeing interest-free, payment-deferred catch-up loans of up to $35,000.

Applications for those loans won't be taken until June 15, but lenders and the SBA office have already been getting a rush of calls from potential borrowers.

Unfortunately both lenders and local SBA officials won't receive all the final details of the program until June 8.

"Everyone is trying to figure this out right now," Neff said.

They are known as America's Recovery Capital loans, or ARC loans. As suggested by the name, they are designed to help small businesses recover and not invest in expansion.

Bell said the loans are specifically designed for business having a cash flow problem. In fact, the loans can only be used for existing business debt, such as loan payments, account payables, mortgages and a company credit card.

Repayment doesn't begin until 12 months after the final loan disbursement and borrowers have up to five years to pay it off.

The SBA will pay the lenders the interest on the loans. Bell said the interest will probably be a point or two above the prime rate.

"It'll be something reasonable," Bell said."... Right now, we don't know all the details."

Applications for the ARC loans are made directly to the lenders.

"The SBA has decided the economy is a disaster nationally," said Scott Soderstrom, the small-business lending officer at Intrust Bank. "They figure lenders can critique the applicants faster than they can, which is true."

Surety Bond Ceiling More Than Doubled For Small Businesses
As Posted to FoxNews

WASHINGTON, Mar 27, 2009 -- Effective today, small businesses that need surety bonds to compete for construction and service contracts can qualify for U.S. Small Business Administration-backed surety bonds of up to $5 million. The higher amount, a result of the Recovery Act, is more than double the previous $2 million maximum surety bond guaranteed by SBA.

Through SBA's Surety Bond Guarantee program, SBA guarantees bid, payment and performance bonds. Surety bonds protect the project owner against financial loss if contractors default or fail to perform.

SBA partners with the surety industry to help small businesses that would otherwise be unable to obtain bonding in the traditional commercial marketplace. Under the partnership, SBA provides a guarantee to a participating surety company of between 70 and 90 percent of the bond amount.

"During these difficult economic times," said Acting SBA Administrator Darryl K. Hairston, "these changes are particularly helpful to small and emerging contractors who need access to surety bonds so they can bid on public construction and service projects. These changes will support small and emerging businesses nationwide, particularly construction contractors who have seen their markets hurt by a poor economy and lagging construction environment."

Additional program enhancements contained in the stimulus bill will be announced soon in the Federal Register. Among these changes is a provision that will allow SBA to guarantee a bond on a federal contract up to $10 million following certification by the contracting officer that the bond guarantee is required.

In recent years SBA has taken a number of steps to reinvigorate its Surety Bond Guarantee Program and make it easier for small businesses to obtain bonds. In 2007, SBA established a more flexible pricing structure, allowing Preferred Surety Bond Sureties to charge current state rates rather than being locked into rates that were established several years ago.

Industry associations have commended SBA for these new changes and SBA continues to encourage surety bond providers and agents to actively participate in the program.

In the past year, SBA also implemented a new electronic bond application process. Small businesses and surety companies participating in the SBA prior approval program are able to transmit application forms electronically to help expedite review and approval processes. The SBA also re-engineered the claims reimbursement process to shorten the cycle time between submission of a claim for reimbursement by a surety company and payment by the government.

SBA assistance in locating a participating surety company or agent and completing application forms is available online. For more information on SBA's Surety Bond Guarantee Program, go online to http://www.sba.gov/osg/ or call 1-800-U ASK SBA.

Release Number: 09-19

SOURCE: U.S. Small Business Administration

   U.S. Small Business Administration
 Dennis Byrne, 202-205-6567
 Internet Address: http://www.sba.gov/news