April 2009

Free money? | Focus

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Free money?

by Ambika Puniani Bailey
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As part of the federal government's recently approved economic stimulus package, the U.S. Small Business Administration (SBA) was charged with creating the Business Stabilization Program.

According to the stimulus bill, the program calls for providing small businesses loans of up to $35,000, essentially interest-free. The government intends for the money to be used to pay down existing debt resulting from bank-issued loans.

If a small business receives a stabilization loan, the money can be used to make payments on pre-existing loans for up to six months and stabilization loan repayment will not be due for a year following disbursement of funds (though it must be fully repayed within five years).

According to the guidelines provided in the bill, banks will issue the loans to small businesses and the SBA will guarantee all loans 100 percent. If a small business defaults on a stabilization loan, the SBA will pay the bank the outstanding amount. The SBA also will subsidize any interest incurred...

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