Business at Fresco Cafe North in Goleta is built on grilled chicken sandwiches, Gorgonzola-and-walnut salads and a $135,000 loan backed by the Small Business Administration.
Owner Indras Govender has had a triple helping of SBA loans since 1995, each used to serve up a new restaurant. In May, he and his wife, Tilly, got their latest from Community West Bank to transform their pizzeria into an eclectic lunch and dinner spot that features giant cupcakes and other desserts.
The loan was crucial to their dream of becoming the first licensed outpost of Santa Barbara's Fresco Cafe, said Govender, whose restaurant employs about 33 workers.
"A lot of us wouldn't qualify for a straight loan from a bank," especially given the credit crunch during the last several months, he said.
Last week, the Obama administration said it would try to make it easier for borrowers to apply for SBA loans and for lenders to make the loans, which are guaranteed in part by the government.
Officials want to encourage recession-easing job growth by getting more SBA loans into the hands of small-business owners such as the Govenders, who doubled their workforce with their new cafe. Smoothing the way to more loans would help many small-business owners in Southern California, where a decline in SBA lending has mirrored a nationwide drop.
Just 1,164 SBA loans were made in eight Southern California counties in the five months that ended Feb. 29. That's a 60% decline from the lending pace during the fiscal year that ended Sept. 30, based on average loans per month: 233 versus 579. The current loan rate is off 75% from 2007's average of 934 loans a month.
The government has promised to spend as much as $15.4 billion to encourage banks to make, and borrowers to apply for, SBA loans.
As much as $15 billion of that will be spent by the Treasury to buy securities backed by pools of SBA loans sold by banks and other financial institutions.
An additional $375 million has been authorized for the SBA to take two temporary steps called for in the recent economic recovery bill:
* Reducing or dropping loan fees for borrowers and, when possible, lenders;
* Raising the guarantee on SBA loans to as much as 90%. Typically it is 75% to 85%.
Most analysts expect the moves to help but not solve the credit freeze afflicting small businesses.
