Small businesses in areas affected by Hurricanes Katrina and Rita will be eligible for a unique new U.S. Small Business Administration-backed loan of up to $150,000 that is being launched this week to help speed financing for recovery and rebuilding. The loans will be delivered through local banks and will be handled under an expedited process that can deliver a response in 24 hours or less.

“Through my visits with small business owners in the Gulf Coast it has become clear that the
unprecedented scope and magnitude of these twin disasters requires a more creative response beyond our traditional disaster loan program,” said SBA Administrator Hector V. Barreto. “The GO Loan program will unleash the liquidity and expertise of commercial banks. We are going to get financing to small businesses as quickly as we can so that they can continue with the urgent reconstruction of their local economies.”

GO Loans will be available through Sept. 30, 2006, to small businesses in the counties and parishes of Texas, Louisiana, Mississippi, Alabama and western Florida that are included in the Presidential disaster declarations for Hurricanes Katrina and Rita, and the contiguous counties and parishes.

The loans will be modeled on SBAExpress loans, which are made by commercial lenders and carry an SBA guarantee. For the GO Loan program, the SBA guaranty percentage will be 85 percent.

Under the program, lenders will generally use their own paperwork and be responsible for evaluating the creditworthiness of applicants. The decision on whether to apply an SBA guaranty to the loans will be made on an expedited basis, with an anticipated turnaround by the SBA of 24 hours or less.

While the SBA does not set the interest rate on the loans, it does prescribe maximum rates the bank may charge. The actual rate is negotiated between the lender and the borrower. Repayment terms are generally between five and 25 years depending on the life of the assets being financed and the cash needs of the business.

Working capital loans (inventory and accounts receivable) should be repaid in five to 10 years.
All lenders that are authorized to make SBA-backed loans under the SBAExpress program will be eligible to make GO Loans. About 40 percent of SBA lenders are currently eligible. To identify an authorized lender in your area, contact your local SBA District Office or visit the SBA Web site at
www.sba.gov/financing/goloans.
SBA is streamlining its requirements for bank eligibility.