Stimulus packages help companies save when they can't repay loans

 While we continue to sift through the more than 1,000 pages of the US Recovery and Reinvestment Act 2009 Incentive Bill, there is one provision that doesn't get a lot of attention but can be very useful for small businesses. If you are a small business and have received a loan from the SBA from a local banker but are having problems paying off, you can get a "stabilization loan". This is true; In the end, some rescue operations fall into the hands of small business owners instead of sinking into the proverbial pit on the stock exchange or the big banks. But don't worry too much. It is limited to certain cases and is not available to most business owners.

There are several news articles that boldly claim that the SBA is now providing waivers if you have an existing business loan and are having trouble paying it. This is not a true statement and needs to be clarified. As you can see in more detail in this article, this is wrong because it is a future problem loan, not an existing one.

Here's how it works. Let's say you're one of the lucky few to find a bank to extend credit to the SBA. You continue on your happy path, but you are facing tough economic times and it is difficult to pay off. Remember, this is not a conventional loan, but a loan from a lender licensed by the SBA, guaranteed by the US government through the SBA by default (between 50% and 90% depending on the loan). The SBA can help you under the new Incentives Act. You can take out a new loan that pays off your existing credit on very favorable terms and thus get more time to revive your business and get back into the saddle. Sounds too good to be true? Well, you are the judge. Here are some of its features:

recover your lost funds

1. Not valid for SBA loans taken before incentive account. Loans outside the SBA can be made before or after the draft law comes into force.

2. Does this also apply to loans guaranteed by the SBA or conventional loans other than the SBA? We don't know for sure. The law only states that it applies to “small businesses that comply with licensing standards and Section 7(a) of the Small Business Act” (Section 506(c) of the new Act). It contains pages and pages with terms that can be applied to both types of loans. Based on some preliminary reports by the SBA, it appears to apply to both SBA and non-SBA loans.

3. This amount depends on the availability of congressional funds. Some believe we will run out of money before we try to save the economy, as we did with our federal bailout.

4. You will not earn this money unless you are a viable business. Wow, you can drive a truck with that sentence. Our SBA friends will determine if you are "worthy" (imagine how low you are when you have to tell your friends that the federal government defines your company as "unfit" and life-sustaining).

5. You must be suffering from "immediate financial hardship." So much for withholding payments because you would rather use the money for other expansion needs. How many months do you have to be a criminal or how close you are to a banana peel from complete business failure, someone suggested.

6. It is uncertain, and commentators disagree, whether the federal government will lend dollars to taxpayers through the SBA or to private banks licensed to the SBA. I thought it would be the last. This carries a 100 percent guarantee on the SBA, and it makes no sense for the government to provide the loan itself.

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