Posted: January 7, 2011

By Philip Newswanger

philip.newswanger@insidebiz.com

The Obama administration is reaching out to the little guy for whom money is tight and assistance is rare.

On March 15, the government will launch two new programs - Small Loan Advantage and Community Advantage - for what the government is calling underserved communities.

They will replace the Small Business Administration's Community Express pilot program, expiring April 30.

In addition, the government has formed the 20-member Advisory Council for Underserved Communities.

The council will be chaired by Catherine L. Hughes, chair and founder of Radio One Inc., a radio station owner and operator.

The government is accepting nominations for the other 19 board members. All members should be on board by April 30.

Two financial conduits will administer the loans.

The Small Loan Advantage loans will be funneled through 630 commercial lenders in the SBA's Preferred Lender Program.

They decide if someone gets a loan. The SBA doesn't.

Community Advantage loans, on the other hand, will be funneled through what the SBA describes as mission-focused financial institutions, including community development financial institutions, certified development companies and nonprofit micro-lending intermediaries.

Community Advantage will leverage the experience these institutions already have in lending to minority, women-owned and startup companies in economically challenged markets, the SBA said.

The loans can be used for working capital and for the purchases of equipment and real estate.

"They look interesting, to say the least," said Jim Carroll, Hampton Roads Small Business Development Center director. The center counsels individuals on starting and operating a business.

"Community Express was a pilot program," Carroll said. "Community Express had limits and the banks didn't want to participate."

Carroll said 50 of his 500 clients received a total of $4 million in loans in 2009.

Both programs will offer a streamlined application process for loans up to $250,000. Community Express loans, by contrast, capped at $50,000.

The government also will guarantee 85 percent for loans up to $150,000 and 75 percent for loans greater than $150,000. The guarantees reduce the risk for lenders of lending money to companies without a proven track record.

The SBA is tackling major problems facing small business owners and entrepreneurs - reducing the risk to lenders, expanding the list of lenders and providing counseling and technical assistance.

Funds for the programs were authorized by the Small Business Jobs Act of 2010, which carved out $505 million for the SBA to support as much as $14 billion in lending to small businesses.

SBA approved $1.5 billion in Small Business Jobs Act loans during the second week of December. The SBA said this was the highest weekly volume since the agency began tracking weekly loan data.nib