Should the SBA be a Lender of Last Resort?

The Small Business Administration (SBA) does not do direct lending, but guarantees a portion that affiliate banks lend to small businesses. The SBA only makes direct loans in the case of businesses and homeowners recovering from a declared disaster. The Wall Street Journal once had an article titled A Plea for Direct Lending to Companies. It contemplated the SBA becoming a direct lender, which has not occurred.

So, why aren’t more businesses being funded?  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, a former Administrator of the SBA (right) suggested that perhaps the problem is not entirely the fault of the banks. Indeed, she suggested that in many instances, the problem lies with the small businesses being unable to provide a satisfactory, understandable loan package to the bank. She was quoted in the article as saying, “we can get them bankable by helping them with their package.”  The WSJ author stated 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 experience and subscriptions to modern software tools to help small business owners pitch participating SBA banks 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 right the first time.