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For hard-pressed businesses, easier credit

Manchester - New Hampshire businesses, particularly auto dealers, got a potential boost yesterday from the U.S. Small Business Administration, which expanded eligibility for its 7(a) guaranteed loan program.

"I'm delighted to see that the Small Business Administration is responding to the concerns that we've been hearing in New Hampshire for months now about the need to provide some additional access to credit for auto dealers and for all small businesses," U.S. Sen. Jeanne Shaheen, D-N.H., said yesterday in a telephone interview.

The SBA will put in place next week a temporary standard that will allow businesses to qualify for guaranteed loans of up to $2 million based on a combination of net worth and income.

Businesses with up to $8.5 million in net worth and average net income after federal taxes (excluding any loss carryover) of $3 million for the preceding two years will now eligible for 7(a) loans.

The SBA is temporarily replacing a loan standard that cut off lending based on sales criteria. For example, auto dealers lost eligibility if sales exceeded $29 million, furniture stores if sales exceeded $7 million.

Under the old guidelines, only a quarter of auto dealers qualified for loans. The SBA estimates 70,000 additional small businesses will qualify for loans nationally based on the new guidelines.

Witmer Jones, SBA's local district director, said, "I think it will definitely result in additional small business loans being made."

"Truly almost all of the small businesses are going to qualify," Jones said.

On March 16, the SBA raised its guarantee for participating banks from 75 percent to 90 percent of the loan and reduced fees paid by borrowers, typically 1 percent of the loan. Both changes were approved in the American Recovery and Reinvestment Act.

Sen. Shaheen was the lead signer on a letter from 32 U.S. Senators to President Obama on April 7 pushing for expanded SBA loan eligibility including auto dealer floor plan.

Yesterday's SBA announcement stopped short of embracing floor financing, but Shaheen said she will continue to fight for it.

"I'm hopeful that they are going to continue to work on that," Shaheen said. "That's one of the biggest challenges auto dealers are having right now."

Peter McNamara, president of the New Hampshire Automobile Dealers Association, said, "Shaheen led the charge and we really appreciate her making that effort to do that.

"We're hoping the Obama administration will make the adjustment where it will apply to floor financing as well," he said.

"The eligibility does help. Each incremental step that we can make to help dealers in this difficult time should prove to be beneficial," McNamara said.

Still, he said, dealers fear losing floor financing, the money banks lend them to buy from manufacturers the cars they sell to the public. "It's very difficult to get a new floor financing plan right now. Some have renewed with their existing lender. There really haven't been a lot of switch overs to new lenders," he said.

Lou Guevin, executive vice president of commercial services for Laconia Savings Bank, said, "If they're increasing the limits, then obviously it will enhance the opportunity for some other companies to get involved in the program."

Laconia Savings Bank lent $100 million, including SBA loans, from February 2008 to February 2009, he said. It is one of the state's largest SBA lenders.

"While there are some concerns in the marketplace, we are continuing to look for good quality loans," he said.

"Ensuring that more New Hampshire auto dealers and small businesses can access credit so they can make payroll, grow their business, and stimulate our local economy is key to our nation's economic recovery," Shaheen said in a statement.