Entrepreneurs increasingly turning to SBA for loan backing

A n increasing number of entrepreneurs are getting loans backed by the Small Business Administration to help them start a corporation, according to the Enterprise Ledger.

Banking officials told the paper that while banks are looking to lend, they are also sending many business owners to the SBA to get a government guarantee for their loans – even though many might have been approved without it.

"In the past, a number of businesses were approved without getting a government guarantee," Jim Parrish, a business advisor for the University of South Florida’s Small Business Development Center, told the paper. "Now, [banks] are sending these same loans to get the government guarantee."

The federal stimulus bill allows the SBA to guarantee up to 90 percent of loans to small businesses, making those loans much more attractive to banks. In just the second quarter of this year, the SBA guaranteed 100 loans worth $43.5 million in just four Florida counties.

But with the increase in loan guarantee requests, the SBA is quickly burning through its budget for further loans. That led the SBA’s top official to ask Congress for more funding, so the agency could continue to encourage new business incorporations.