SBA Allows Businesses To Borrow at LIBOR

The Small Business Administration took another step toward unlocking the credit freeze by allowing businesses to borrow at the London Interbank Offered Rate (LIBOR), which is significantly lower than the prime rate these days.

Typically, the difference between LIBOR and the prime rate is around 300 points, but that has grown significantly during the financial crisis. As a result, investors are penalized for lending to businesses at the prime rate because investor gains are based on the LIBOR.

The change should encourage investment in small businesses and, hopefully, open up the credit markets so that businesses have more access to capital.

Source:

Inc.com: SBA Revamps Lending Rules

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