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The world has been experiencing a failing economy now for a couple of years and regardless if you are in manufacturing, service, distribution or anything else that relies on one of these industries to survive, you have been affected by the cost cuts and staff reductions.

The world has been experiencing a failing economy now for a couple of years and regardless if you are in manufacturing, service, distribution or anything else that relies on one of these industries to survive, you have been affected by the cost cuts and staff reductions.

As in the NY Times on March 15, 2009 ''It's a huge step in the right direction,'' Giovanni Coratolo, director of Small Business Policy at the U.S. Chamber of Commerce, said Saturday. ''In this economy, having the least amount of risk for banks will incentivize banks to lend to small businesses. A lot of small businesses will benefit from this.'' [http://www.nytimes.com/aponline/2009/03/15/washington/AP-Obama-Small-Businesses.html?hp]

So what are they referring to? SBA Loans and the way they are structured. Currently the US Government guarantees up to $20 billion in SBA Loans. But of these $20 billion, how many are being written? In 2009 we are on pace to write less than half of these loans, so how will guaranteeing more of these loans help the economy? It wont, there needs to be more that just saying they will guarantee more loans since much of the pool is not being used now.

So what is the plan? Offsetting some of the risk for the Lenders of the SBA loans and Temporarily reducing some of the fees on some of the SBA Loan programs. The risk offsetting tactic will be to increase some of the guarantees on the SBA Loans that are written.

The question now becomes is this enough or just a token to say they are doing something that is left to be seen obviously but lets take a look at this from a business prospective.

Since the majority of this plan is increasing guarantees, is it going to be enough to allow the lenders to reduce their underwriting guidelines to allow more small businesses to access these funds? Lets take a look. We need to make a few broad assumptions here, but lets say that we are currently experiencing a 20% default rate on the SBA Loans being written today. And lets say that the traditional SBA lender will accept a 5% default rate on their Business Loans. Will an increase of 5% toward the defaulted Business Loans have any real impact on the mindset of the risk allowance calculations? Not likely. There are more variables and figures to enter into this calculation, but I am sure you see the point here, it is a start, but it is not enough to motivate SBA Lenders to approve more loans.

Now this is not all bad news, at least there has been an effort to help, and as we have seen the initial offer is always open to negotiation. While this is a step in the right direction, we need more to get the economy moving.

There are so many alternatives to SBA or bank loans today that are offered by Commercial Finance Brokers as they access to funds for Accounts Receivable Financing, Export Factoring, Purchase Order Finance, Commercial Equipment Loans and Commercial Real Estate Mortgages. Be sure to do you checking around into the various options available to you as there is a loan available for most circumstances if you have the right Finance Broker.

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