President Bush signed legislation in February that will provide small businesses nearly twice the guaranteed loan authority granted under the U.S. Small Business Administration.
The legislation, which allows the administration to guarantee an additional $3.4 billion in loans to small businesses this year, is expected to be a boost for veterinary practices. The change is expected to lower the default fees small businesses currently pay on their SBA loans, enabling the administration to boost 7(a) lending authority from $4.8 billion to $8.2 billion for the current fiscal year.
The AVMA was part of a coalition of small business associations and the U.S. Chamber of Commerce that pressed Congress for the increased loan authority. Now, more money is available to veterinarians looking to starting their own practices, according to Dr. William Zitek, chair of the AVMA Council on Veterinary Service. "People are always looking for a source of money to get going," he said.
The Senate passed the bill, S. 141, in January and the House did so the following month. The new law directs the Small Business Administration to begin using a more accurate model for determining loan subsidy rates in the 7(a) Guaranteed Loan Program.
This "econometric" model uses current default rates as well as future trend indicators to determine a more accurate subsidy rate. The current system uses outdated data to determine the rate small businesses must pay to cover defaults on the SBA loans.
"This subsidy rate fix will nearly double the amount of loans SBA can guarantee, allowing our small employers to invest back into their businesses," Illinois Rep. Don Manzullo, chairman of the House Small Business Committee, said. "That means more jobs for Americans and a quicker recovery for our economy."