Should the SBA be a Lender of Last Resort?

The March 4, 2010 issue of The Wall Street Journal had an article written by Emily Maltby titled A Plea for Direct Lending to Companies. In the piece, Ms. Maltby discusses the pros and cons of the SBA passing over the banks and becoming a direct lender to small businesses itself. Clearly there are pros and cons but the general conclusion is that the SBA does not have the infrastructure in terms of systems, trained lenders, etc. to become a direct lender and in any case, does not want to compete with the very banks that have joined the SBA’s programs. President Obama even suggested that “creating a direct lending system would make a massive bureaucracy.”

So, what is the problem here?  If the SBA is willing to provide as much as a 90% guarantee, shouldn’t the banks be eager to lend when their ultimate source of repayment is Uncle Sam?

Karen Mills, the Administrator of the SBA suggests that perhaps the problem is not entirely the fault of the banks. Indeed, she suggests that in many instances, the problem lies with the small businesses being unable to provide a satisfactory loan package to the bank that it can understand and lend against. She is quoted in the article as saying, “we can get them bankable by helping them with their package.”  Says Ms. Maltby, Mills is “referring to the owners’ business plans and other necessary application materials required by lenders.”

It’s at this point that I sat up and said, “Hey, that’s what we do at Cayenne.”  We have the staff, the expertise and the experience to help small business owners prepare to go to an SBA participating bank with a complete, well documented loan package.  In fact, we already do it all the time.

Note to small business owners: You don’t have to do this by yourself.  There are plenty of resources right here at Cayenne that you can use to get your loan package prepared and prepared right the first time.