As part of the recovery act, a fund was setup to help small business owners obtain loans without all the red tape. SBA loans have very low interest rates, 90% of the loan is backed up by the government, and Big Brother also helps pay for a portion of the closing costs. However, by the end of May, the benefits had dried up-leaving those that applied to get the loans a couple of month earlier, in limbo.
In April, Kermon Pardue, an
"I've been thinking about putting in an oil change out here for the last 4 to 5 years... because there's nothing on the west side, the closest oil change is seven and half miles from here," said Pardue.
By using an SBA loan, Pradue would save thousands of dollars.
"They help you with interest rate, they guarantee your loan to my bank, which my bank sorta has nothing to lose,” said Pradue.
But for weeks, his application sat behind other applicants. Then the money ran out.
"A lot of the banks are now hesitating to do some of
these loans because there's no longer a 90 % guarantee and that was the only
way we were getting deals done for small business owners,” said Enrique Romero,
This critical pitfall has put many small business owners in a bind. Some can no longer expand their businesses, while others can no longer open their doors.
“Small business owners have to come up with more money and most of them are not able to do so,” said Romero.
Pardue couldn't wait around anymore. So he changed the type of loan he had. Now he's stuck paying fees and other things. But he's been able to get the ball rolling on his new business.
"Had I not went with SBA I could of been open for business by now," explained Pradue.
New legislation is expected to be pass by the end of this month that will once again fund SBA loans.