WASHINGTON — Lenders have begun to return to Small Business Administration lending after temporary changes to its programs mandated in the stimulus package, SBA Administrator Karen Mills said Tuesday.
President Obama signed the stimulus package into law on Feb. 17, and since then 361 lenders have made new SBA loans for the first time since last September. Of those, 166 had not made a loan since at least December of 2007.
"We are well on our way" to implementing various provisions in the stimulus package, Mills said in an interview. "Money is out there in the hands of lenders; they've put it in the hands of borrowers and small businesses, and that was the objective, so we're very pleased so far with the quickness with which the team here was able to get it out and the lenders were able to respond."
Mills said the SBA was still working on getting other programs created by the stimulus package up and running, such as a facility to lend money to broker-dealers that pool SBA loans in the secondary market to help finance their inventories.
"Broker-dealers have liquidity. … We are not relying on that to clear the market," Mills said. She said the SBA would nevertheless proceed with the establishment of that facility.
Mills also said the SBA would continue working with the Treasury Department to set up a program that would use $15 billion from the Troubled Asset Relief Program to fund direct government purchases of SBA loan-backed securities from broker-dealers.
The Obama administration announced the program in mid-March, while the SBA secondary market was still in a deep freeze. Broker-dealers' bids — when they made any at all — were much lower than what lender selling their loans had expected. The lenders complained that they could not make new loans while they were unable to sell the guaranteed portions of their existing loans and generate more liquidity.
But since the announcement, lenders and broker-dealers alike have reported a revival of the secondary market independent of government efforts. Mills, however, said the SBA will not abandon the $15 billion purchasing facility.
"I think we've committed to clear the secondary market," she said. "We will be very happy when the secondary market is working as a market and providing liquidity for banks; that's the objective. That's what we're focused on. That's what we promised, that's what we're committed to doing. We're going to make sure that happens."
She said the Tarp facility was not meant to replace the secondary market, but to support it.
When she took the helm as administrator a little more a month ago, Mills faced an agency that had been relegated to the sidelines during much of the Bush administration. The agency's staff was whittled down as the volume of loan guarantees it approved plummeted.
But passage of the Obama administration's stimulus package thrust the SBA back into prominence. Now, lawmakers and administration officials are looking to the agency's loan programs to help jump-start the economy. Congress gave the SBA nearly $90 million in the stimulus package to beef up its staffing, marketing and oversight efforts. Mills said her top priority is the implementation of the stimulus provisions, but a close second is the expansion of the SBA's staff and IT capabilities. She said she also wants to build up a bigger base of SBA lenders among state-chartered banks and credit unions.
Mills did not say whether she would actively lobby Congress for further improvements to her agency, but she said she felt involved in wider policy discussions.
"I think this agency is going to take a leadership role in advocating for all of the issues of importance to small business," she said.