WASHINGTON - The Small Business Administration is making a trade with bankers: expedited loan procedures in return for sharing the risk.
In a pilot program called Fastrak, it will allow lenders to use their own documentation and pre-approved loans under $100,000. In return, the agency will guarantee only 50% of the loan, as opposed to its usual guarantee of 90% for loans under $100,000.
First Security Bank of Missoula, Montana, one of 18 banks chosen to participate in the pilot program, expects to increase its small-business lending, said Hal Fraser, senior vice president of First Security.
"This gives us another SBA program on our menu," Mr. Fraser said. "We already have a high loan demand and we anticipate this will add to it."
Mr. Fraser said that being able to use the bank's documentation will speed up the loan-application process.
The new loan program comes at a time when Congress is threatening to reduce funds for the Small Business Administration and the agency is trying to cut costs by reducing its responsibility for unpaid loans.
The agency's loan-loss rate declined to 1.27% last year from a high of 4% in 1987.
Mr. Fraser defended the SBA's performance, arguing against any cuts in the agency's budget by Congress.
"SBA lending is commercial lending and there is some risk involved," he said. "The SBA programs are very important to states like Montana that depend on small business and I would not support cutting them."
Without SBA help, he said, "there would be a lack of long-term lending to small business owners."
Ms. Oppenheim writes for the Medill News Service.