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American Recovery and Reinvestment Act: Why local businesses should talk to their lender

Q&A with California Bank & Trust's San Diego Division President Tory Nixon

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What is the new American Recovery and Reinvestment Act?

The American Recovery and Reinvestment Act of 2009 (Recovery Act) was signed into law by President Obama on Feb. 17. It is an unprecedented effort to jumpstart our economy, create or save millions of jobs, and put a down payment on addressing long-neglected challenges.

How can a small business take advantage of the Small Business Administration (SBA) funds recently allocated from the American Recovery and Reinvestment Act?

The Recovery Act makes the SBA part of the solution, providing specific tools to make it easier and less expensive for small businesses to get loans. The act also provides lenders with new incentives to make more small business loans and help unfreeze the secondary markets to boost liquidity in the credit markets.

The Recovery Act will have a significant impact on small businesses. Under the new act, some of the loan fees normally associated with SBA loans have been temporarily eliminated. And, because the government is now guaranteeing up to 90 percent of SBA 7(a) loans, lenders have more of an incentive to make SBA loans. The SBA 7(a) loan can be used in many ways: to provide working capital, purchase inventory or equipment, purchase or make improvements to a building or make business acquisitions. The SBA 504 loan program can be used to purchase real estate or large equipment. Loans made through the 7(a) program range from $25,000 to $2 million and up to $10 million for the SBA 504 loans.

Who can benefit from the Recovery Act?

Any small business can benefit from the act. In San Diego, roughly 87 percent of businesses are classified as small businesses. If you are a small business owner and need a loan to purchase a building, equipment or expand, an SBA loan under the Recovery Act is the loan you should ask your bank about.

Small businesses will benefit both from the elimination of fees and from the historically low interest rates on both 7(a) and 504 SBA loans. However, SBA loans are not for publically traded companies, nonprofits or investors.

If I am interested in applying for funds allocated from the act, what is my next step?

SBA 7(a) and 504 loans under the American Recovery and Investment Act can only be secured through a lender. The first step is to look for a bank that is both a "preferred" SBA lender and recognized for its SBA loan expertise, such as California Bank & Trust. As part of Zions Bancorporation, California Bank & Trust is the No. 1 SBA 504 lender in the United States and consistently one of the top 10 SBA 7(a) lenders.

Ask your local California Bank & Trust banker about SBA loans by calling 1-800-585-1722 or visit www.calbanktrust.com.

Submitted by California Bank & Trust

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