News Details (Posted: November 17, 2008):

SBA TO ENCOURAGE BUSINESS LOANS

Full Description:

The Small Business Administration hopes to encourage lenders to resume making 7(a) business loans by letting them charge higher interest rates to borrowers. Previously, lenders based their interest rates on government-guaranteed 7(a) loans on the prime rate. Recently, however, the London Interbank Offer Rate (LIBOR), which lenders often must pay in order to obtain capital, has matched or even exceeded the prime rate. As a result, SBA lending has become unprofitable and lending to small businesses had declined dramatically. This is one reason why 7(a) lending, an important source of long-term financing for small businesses, has declined dramatically. The solution? The SBA now will allow lenders to use LIBOR as the base rate for pricing 7(a) loans, effective immediately.