Nearly half of Small Business Administration lenders increased their loan volume this month as a result of the Small Business Jobs Act, according to a survey conducted by Terry & Associates.

The firm provides executive search services to SBA lenders.

The Small Business Jobs Act, which was signed into law Sept. 27, increased the government guarantee on the SBA's flagship 7(a) loans to 90 percent and waived fees for borrowers. These incentives were first put into place by the economic stimulus bill but expired at the end of May. Now they're back, but only through the end of December.

As a result, SBA lending is expected to boom this quarter. But it faces an uncertain future in January unless Congress extends the incentives again when it returns to Washington after the Nov. 2 elections.

"If Congress wanted to truly stimulate lending to small businesses and create new jobs, a simple three-months extension is absolutely not long enough," said Tim Terry, president of Terry & Associates.

The impact of the Small Business Jobs Act can be seen in the SBA's lending numbers this month. Through Oct. 22, the SBA had approved 4,337 7(a) loans for $1.6 billion, compared with 3,496 loans for $828 million during the same period in October 2009. During the first three weeks of October 2008, when the financial crisis was freezing credit, the SBA approved only 2,206 7(a) loans for $439 million.

During this October, the SBA also approved 511 loans totaling $280 million through its 504 program, which primarily finances real estate. They are far above their levels during the previous two Octobers.

This month's lending numbers were boosted by loans that had been sitting in a queue, awaiting renewal of the SBA incentives. By Oct. 5, the SBA had cleared the queue, approving 1,939 loans totaling nearly $970 million.

Nearly 70 percent of SBA lenders surveyed by Terry & Associates said they will increase their 7(a) and 504 lending as a result of the Small Business Jobs Act. More than 35 percent expect to increase their SBA lending by 25 percent or more.

The legislation also increased the maximum size limit on 7(a) loans and most 504 loans from $2 million to $5 million. This increase "could very well bring a brand-new dimension to SBA lending," Terry said.

For more information, see www.sba.gov

Credit reports defended to assess job applicants

A bad credit report can keep you from getting a mortgage; should it also prevent you from getting a job?

That was the question at a recent hearing held by the Equal Employment Opportunity Commission, the federal agency that enforces laws that prohibit discrimination against workers based on race, religion, gender, age or disability.

Legislation pending in Congress would limit the use of credit reports in hiring decisions to special cases, such as jobs requiring national security clearances. Supporters contend the bill is needed because employers are increasing their use of credit reports during the screening process.

That's just not fair, contends the National Consumer Law Center. Credit reports can be full of inaccuracies, and they're not good predictors of job performance, the center argues. Plus, using credit reports discriminates against blacks and Hispanics, according to the center, since these groups have higher foreclosure rates due to predatory lending practices and tend to run up higher medical bills than whites.

The use of credit reports also makes it harder for unemployed people to find jobs, since workers who lose their jobs often fall behind on paying their bills because of lack of income, the center contends.

Groups representing employers, however, contend that credit checks are useful in evaluating job applicants.

"They provide a variety of information that cannot otherwise be confirmed by an employer," said Pamela Devata, a partner with Seyfarth Shaw LLP who represents businesses on employment issues. "They are viewed as a valid indicator of a person's judgment and potential risk to the company."

Employers typically use credit reports only for positions where they are relevant, such as jobs with financial responsibility or those with access to confidential information, according to surveys by the Society for Human Resource Management.

See www.eeoc.gov

Angel investors give less money to more ventures

Angel investors provided $8.5 billion to businesses in the first half of 2010, down 6.5 percent from the same period a year earlier.

That's according to the Center for Venture Research at the University of New Hampshire.

More than 25,000 ventures received funding, up 3 percent from the first half of 2009, as the average deal size dropped 9 percent.

Angel investors, however, continue to lose their appetite for seed and startup investing. Only 26 percent of angel investments in the first half of this year went to these type of companies. Last year, that number was 35 percent, and in 2008 it was 45 percent.

"Historically angels have been the major source of seed and startup capital for entrepreneurs, and this declining interest in seed and startup capital represents a significant change in the angel market," said center Director Jeffrey Sohl. "Without a reversal of this trend in the near future, the dearth of seed and startup capital may approach a critical stage, deepening the capital gap and impeding both new-venture formation and job creation."

Health-care services/medical devices was the leading industry for angel investments, followed by biotechnology, software, industrial/energy, retail and media.

For more information, see www.unh.edu/news/docs/CVRQ1210.pdf

Kent Hoover: khoover@bizjournals.com