[OP-ED] INDIANAPOLIS, Ind. — The American Recovery and Reinvestment Act (Recovery Act) and Department of Treasury actions hold potential for helping solve our small business credit crunch by offering incentives to lenders to provide capital to small businesses, and by reducing the cost of borrowing for small businesses.

The U.S. Small Business Administration (SBA) guarantees loans that are made to small businesses by lending institutions such as banks and credit unions. Upon request by a financial institution, the U.S. Small Business Administration can assume a major portion of the risk of lending to a small business. This is an incentive for the lender to make loans; particularly to start-up businesses and businesses in new industries.

With the help of our resource partners: SCORE, the Indiana Small Business Development Center Network, and the Women’s Business Centers; the SBA Indiana District Office can assist Indiana entrepreneurs with their business planning, assist with preparations for seeking financing, and help analyze strategies and techniques that will guide the business through challenges and for planned growth.

The Recovery Act provides SBA with $730 million in total funding. This includes $375 million to cover the costs of temporarily eliminating loan fees for borrowers and raising guaranty limits on some loans; providing extra funding for SBA-backed Microlenders; and targeting $255 million for a new loan program that is being developed to help viable small businesses with immediate economic hardship make payments on existing loans.

For SBA lenders, the Recovery Act supports guarantees of up to 90 percent on most types of SBA 7(a) loans to qualified small businesses. SBA 7(a) loans can be used for a wide variety of business purposes. With a 90 percent guaranty on a $100,000 loan, for example, the financial institution will be at risk for only $10,000. This level of risk-sharing will be a substantial incentive for a financial institution to make capital available for small businesses.

Prior to our economic downturn, many of the loans guaranteed by SBA were pooled and sold to investors on the secondary market. This mechanism placed more capital into the marketplace for additional lending. In the past several months; however, this secondary market has stalled. To further assist SBA lenders, particularly smaller community banks and credit unions, the Treasury Department will commit up to $15 billion in TARP funds to help unfreeze the market. The Treasury will use the TARP funds to purchase existing and new SBA-backed loans made by our lenders. This is viewed as a major step toward increasing the opportunity for SBA-backed lending to our small businesses.

Another SBA program is the 504 Certified Development Company Loan Program (504). This program is used to finance purchase or construction of a building or for purchase of long-lived, major equipment. A change to the 504 program under the Recovery Act is its use to refinance existing fixed asset loans as part of a business expansion project. As further incentive for lenders, the Recovery Act temporarily eliminates 504 loan fees they had been paying. The Recovery Act also authorizes SBA to use its guaranty authority to establish a secondary market for bank loans made under the 504 loan program; and to make loans to broker-dealers who buy SBA-backed loans from lenders and pool them for sale to investors on the secondary loan market.

The Recovery Act enables immediate savings for small business borrowers. Prior to the Recovery Act, loans with an SBA guaranty had an upfront fee charged to the borrower. Money collected from the upfront fee had been pooled and used to help pay the guaranteed portion of the loan to the lender if a small business defaulted on a loan. Elimination of the borrower loan fee under the Recovery Act represents a substantial savings to the small business. For instance, if a small business borrowed $100,000 from a bank under the SBA 7(a) guaranty program, the upfront loan fee would have been $1,700.

With the help of our resource partners: SCORE, the Indiana Small Business Development Center Network, and the Women’s Business Centers; the SBA Indiana District Office can assist Indiana entrepreneurs with their business planning, assist with preparations for seeking financing, and help analyze strategies and techniques that will guide the business through challenges and for planned growth.

The temporary loan fee eliminations and 90 percent guarantee provisions will apply to approximately $8.7 billion in 7(a) guaranteed loans and $3.6 billion in 504 loans across the country. SBA estimates that its allotment from the Recovery Act will cover lending in both programs through calendar year 2009.

While it is a challenging time for prospective and current business owners, our Indiana entrepreneurial spirit will help us rebuild our economy. The American Recovery and Reinvention Act of 2009 holds opportunities for re-starting lending and promoting investment in our nation’s small businesses. Now is the time to take advantage of the many elements in the Recovery Act. Contact SBA at 317/226-7272 or www.sba.gov/in for more information and assistance.

WASHINGTON, DC -– 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.

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.

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.

WASHINGTON, DC — As part of the Treasury Department’s consumer outreach effort and with the April 15 individual tax filing deadline approaching, the Internal Revenue Service today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8,000 first-time homebuyer credit for 2009 home purchases. For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.

The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible.

First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.

“The new credit can get money in the pockets of first-time homebuyers quickly,” said IRS Commissioner Doug Shulman. “For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.”

First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

The filing options to consider are:

• File an extension — Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.
• File now, amend later — Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.
• Amend the 2008 tax return — Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.
• Claim the credit in 2009 rather than 2008 — For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

IRS.gov provides more information, including guidance for people who bought their first homes in 2008. To learn more about the overall implementation of the Recovery Act, visit www.Recovery.gov.