Adjustments improve access to capital, strengthen socially disadvantaged companies.The federal Small Business Administration announced two rule changes intended to expand access to capital and strengthen a program for economically or socially disadvantaged businesses.
A proposed change to the federal 8(a) Business Development program would clarify the requirements to determine whether joint ventures and mentorships qualify as being economically disadvantaged.
The 8(a) program helps qualified businesses over a nine-year period, and provides access to federal government contracting opportunities, as well as specialized business training, counseling, marketing assistance and executive development. Small businesses received $16.1 billion in 8(a) contracts during the 2007-08 fiscal year.
Joint ventures will be required to show they can build capacity, while mentor-protÃ©gÃ© programs will be required to tie assistance to the protÃ©gÃ©Âs business plan, according to the proposed change. The SBA also is seeking comments on the best way to determine whether tribally owned firms are economically disadvantaged.
The other regulations announced by the SBA will start a secondary market guarantee program to provide greater liquidity for lenders and expand access to capital for small businesses, SBA officials said.
The regulations would affect the 504 Certified Development Company program. Under the CDC, businesses received credit to buy real estate and other fixed assets. The financing includes a first mortgage from a private lender for 50 percent of the cost, a second mortgage guaranteed by the SBA for 40 percent of the cost and equity from the business covering 10 percent of the cost.
Under the new regulations, portions of the first mortgages would be guaranteed by the SBA and sold on the secondary market. Eligible mortgages must occur before Feb. 16, 2011, according to the SBA.
The rule changes were announced Wednesday.
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