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Christina Harris got $15,000. She used it to help start a pushcart stamp outlet at the Pheasant Lane Mall in Nashua. Roger Weinreich got $20,000 to buy a pawn shop and consignment business located in Keene. Dan Verreault got $90,000. He was able to buy the equipment he needed to sell speakers to Japan from Bedford.
Each got a U.S. Small Business Administration loan. But it was not an ordinary SBA loan, instead the money came from the agency's two-year-old LowDoc loan program. The SBA guaranteed some 200 of the loans through the state--nearly as many as it guaranteed under its regular 7(a) loan guarantee program. The result has been nearly $10 million in the hands of businesses--small, established or start-ups--that would have had trouble borrowing money from the bank.
It's the bank, not the SBA, of course, that is lending the money. But in the past, some banks have been reluctant to work through the SBA, even with the 80 percent federal guarantee, unless the loan was risky enough to warrant it. Banks usually used the agency for larger loans, from which they can make a profit, both in fees and interest. But the profits shrink as the size of the loan decreases because the work to put a small loan together is the same as a large one. And when you involve the government, you are talking more work, not less.
So the SBA is trying to make it easier for banks to make smaller loans, and the attempt seems to have succeeded.
The LowDoc loan program is a major step in the direction of a new image for the "reinvented" agency. It only requires one extra page of paperwork beyond a regular loan application, if the loan is under $100,000. The borrower must be a start-up or have less than $5 million in annual sales and employ less than 100 people.
There are several other advantages for small businesses.
You can stretch out LowDoc repayments for fixed assets for 25 years. The turnaround is quicker. The LoDoc application is...