ARRA Increased Small Business Administration Guarantees of Certain Loans, Temporarily Eliminated Fees; TARP Increased Funding to Help Unfreeze Credit
Letter to Administrator Mills Urges SBA to Work with Colorado Lenders to Ease Credit Crunch Caused by Closure of New Frontier
Washington, DC - U.S. Senators Michael Bennet and Mark Udall, and Congresswoman Betsy Markey today urged the Small Business Administration (SBA) in a personal letter to use newly available incentives from the economic recovery act and the Troubled Asset Relief Program (TARP) to help Colorado lenders extend credit to small businesses affected by the closure of New Frontier Bank.
The American Recovery and Reinvestment Act (ARRA) increased the SBA's guarantees of certain loans and temporarily eliminated fees for borrowers and lenders. These changes make SBA loans less risky and costly for lenders, and more affordable for borrowers. In addition, the Administration dedicated $15 billion in TARP money to unfreeze the secondary markets for SBA loans, which provides greater capacity for banks to extend much needed credit. In an effort to help Eastern Plains small business owners, the lawmakers asked that the SBA work closely with Colorado lenders to "look for ways to extend much needed credit for small businesses that are struggling as a result of New Frontier's failure."
"This is a tough economic climate compounded by the failure of a local community bank. We have to leave no stone unturned in finding credit solutions for Colorado's small businesses affected by the closure of New Frontier bank," Bennet said. "The Small Business Administration can help Colorado lenders find ways to extend credit to help families get through these very uncertain times."
"Small businesses are the life-blood of our communities, and they employ thousands of Coloradans. We need to use every tool available to help those who are hurting - through no fault of their own - after the closure of New Frontier Bank," Senator Udall said. "I urge the SBA to work closely with Colorado communities to help small business owners get through this credit crunch."
"Small businesses in Northern and Eastern Colorado are struggling in the wake of the collapse of New Frontier Bank," said Rep. Markey. "Add to that already difficult economic conditions and we're left with a grim situation for our region, state and country. Small businesses across Colorado will pull through and succeed in the long-term if they can just make it through this rough patch, and bringing more tools to bear will help them get there."
The full text of the letter is included below:
June 16, 2009
The Honorable Karen G. Mills
U.S. Small Business Administration
409 3rd Street, SW
Washington, DC 20416
Dear Administrator Mills:
We write to urge the Small Business Administration ("SBA") to work aggressively with its lenders to provide financing for small businesses throughout Northeastern Colorado, which are struggling after the failure of a regional bank.
On April 10, 2009, the Colorado Division of Banking ordered the closure of New Frontier Bank (hereinafter, "New Frontier") in Greeley, Colorado. Since then, the Federal Deposit Insurance Corporation ("FDIC") has worked to aid customers in managing their deposits. While New Frontier was the largest agricultural lender in the area, it also provided a significant amount of capital to small businesses. In total, New Frontier's assets enabled it to provide $2 billion in credit to local farms and businesses.
Without alternative financing, small businesses throughout this region will encounter extreme difficulties as they attempt to invest, make payroll, or even stay open.
As you know, the American Recovery and Reinvestment Act increased the SBA's guarantees of certain loans and temporarily eliminated fees for borrowers and lenders. These changes make SBA loans less risky and costly for lenders, and more affordable for borrowers. In addition, the Administration has dedicated $15 billion in TARP money to unfreeze the secondary markets for SBA loans, which provides greater capacity for banks to extend much needed credit.
With all of these incentives, it is our hope that the SBA can work closely with its Colorado lenders to look for ways to extend much needed credit for small businesses that are struggling as a result of New Frontier's failure.
If you have any questions regarding the foregoing, please do not hesitate to contact us. Thank you in advance for your attention to this matter.
|Michael F. Bennet