Increasing credit restrictions over the past couple of years have had a noticeable effect on small businesses. Banks, stifled by their own capital needs, have put increasingly tighter regulations on small business loans. This has made it difficult for companies that seek to grow or recapitalize existing loans, buy equipment or real estate, add to their work force, and for entrepreneurs to start new businesses.

It has also constrained small businesses from producing new jobs to spur the economy which is what is needed during difficult economic times. In the past, the Small Business Administration (SBA) has offered small businesses loan guaranties through many of its loan programs and has also made government contracts available to small businesses.

However, 2011 may provide a light at the end of the tunnel for some small businesses in desperate need of funds. The Small Business Administration has introduced some much-needed programs, including the Small Loan Advantage and Community Advantage.

The SBA is confident that these two new initiatives will increase the amount of loans to those businesses in need of smaller business loans and to businesses in under-served communities. These two new initiatives build off the SBAs “Advantage” platform and will offer a streamlined application process for SBA 7(a) loans of up to $250,000.

The Small Loan Advantage Program has the following characteristics:

Structured to encourage larger, existing SBA lenders (intermediaries) to make lower-dollar loans, which often benefit businesses in under-served markets.

Maximum Loan Size: $250,000

Guarantee: 85% for loans up to $150,000 and 75% for those greater than $150,000.

Approval Time: Loans submitted electronically through e-Tran (SBA’s electronic system for submitting certain SBA loans and loan servicing requests) will be approved within minutes. Other applications will be approved within one business day.

Paperwork: Streamlined paperwork, with a two-page application for borrowers.

Lender Requirements: Open to banks participating in SBA’s Preferred Lender Program (PLP) which includes many of the nation’s largest lenders.

Time Frame: Implemented on or before March 15, 2011.

The Community Advantage Program has the following characteristics:

Pilot initiative aimed at increasing the number of SBA 7(a) lenders who reach under-served communities, targeting mission-focused financial institutions which were not able to offer SBA loans previously.

Maximum Loan Size: $250,000

Guarantee: 85% for loans up to $150,000 and 75% for those greater than $150,000.

Approval Times: Most loans will be approved within 5 to 10 days.

Paperwork: Features streamlined paperwork, with a two page application for borrowers.

Lender Requirements: Open to mission-focused lenders, including some Community Development Financial Institutions (CDFIs), non-profit Certified Development Companies and SBA-approved micro-lending intermediaries. Community Advantage lenders will be expected to maintain at least 60% of their SBA loan portfolio in under-served markets.

Time Frame: Three-year pilot initiative. SBA will begin taking applications from mission-focused lenders interested in this program on or before Feb. 15, 2011, with loan applications accepted on or before March 15, 2011.

Smaller lending institutions have understandably been hesitant about loaning money; however, with the implementation of such programs, the guarantees will help assuage lenders worried about high rates of default during tough economic times.

Additionally, these new programs will put funds in the hands of the borrowers at a more efficient pace, thereby allowing them to deploy capital more quickly. Perhaps most importantly, the Community Advantage Program will help communities that have historically been under-served by working with institutions already experienced in lending in economically-challenged markets and also have management and technical assistance expertise.

It can only be hoped that in 2011 the economy will begin to bounce back thanks in part to the availability of more borrowing opportunities to companies and under-served communities.