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SBA official learns of lending challenges

The Small Business Administration's national ombudsman brought her national listening tour to the Knoxville area this week, where she met with business owners and leaders, and she left with an earful.

Esther Vassar met Thursday with members of Areawide Development Corp.'s board to discuss SBA lending, where she told board members that her visit was to learn about East Tennessee businesses' experiences with SBA loans so that she can report her findings to SBA directors in Washington, D.C.

Areawide Development representatives weren't shy about airing concerns that ranged from overly cumbersome federal loan rules created in the wake of the financial industry crisis to customer service observations within the administration.

Areawide Development Corp. markets and processes SBA Section 504 loans to small businesses in partnership with banks to help finance capital projects. Board members set Areawide Development Corp. policy and approve loan applications.

The board members made it clear that SBA loans, such as the 504 loan program that provides funding for the acquisition, construction, or renovation of commercial real estate or for the purchase of machinery and equipment, are invaluable in assisting small business owners who need financing but currently don't meet traditional lending requirements.

Areawide Development's Tim Brew said regulations governing the SBA's loan refinancing program were too complicated, requiring burdensome documentation going back more than a decade. Brew explained that banks are being told to limit their exposure with commercial real estate holdings at a time when solid businesses needing financing for expansion have their property as primary collateral.

"I had one person tell me it's like the left hand doesn't want the right hand to be cooperative," Brew said.

Vassar said banks often are being cast as the bad guys but she needs to know that new federal rules governing banking may be impeding progress for businesses needing growth financing.

Bernanke Offers No Indication of New Economic Stimulus « Ketron ...

But with no mention of new action, as economists Patrick Newport and Nigel Gault from IHS Global Insight put it, Bernanke’s speech “wasn’t the blockbuster event that markets had been looking for.”

In a research note following the highly anticipated speech, the IHS analysts said, “Unfortunately, the Fed doesn’t have any rabbits to pull out of the hat to magically re-ignite economic growth. It is doing what it can (and that will probably mean more quantitative easing at some point), but its prime ammunition has already been used.”

At last year’s Jackson Hole meeting, Bernanke energized the markets with hints of QE2, a second round of ‘quantitative easing’ that involved buying up $600 billion more in Treasury bonds to keep interest rates low and money flowing. No such spark this year.

Instead, Bernanke criticized policymakers for their handling of the U.S. fiscal situation and the raising of the debt ceiling, and warned of the continuing volatility stemming from reactions to Europe’s financial troubles.

“It is difficult to judge by how much these developments have affected economic activity thus far, but there seems

little doubt that they have hurt household and business confidence and that they pose ongoing risks to growth,” the Fed chief said.

Bernanke said he believes the nation can avoid a second recession but stressed that it will take more than the central bank’s monetary policy incentives to get the economy moving again.

“[M]ost of the economic policies that support robust economic growth in the long run are outside the province of the central bank,” he said.

Housing was the black eye of the Fed chairman’s address. Bernanke said this “recession, besides being extraordinarily severe as well as global in scope, was also unusual in being associated with both a very deep slump in the housing market and a historic financial crisis.”

He said these two features of the downturn have acted to slow the natural recovery process.

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Bank loan classification and provisioning practices in selected developed and emerging countries