SBA lending returns to pre-boom levels

A steady flow of new loans backed by the Small Business Administration in the Washington area is helping some institutions return to the pace of lending that was common in the pre-boom years.

Through the three months ended Dec. 31, the start of the agency’s 2012 fiscal year, 126 loans totaling $43.4 million were made to local mom-and-pop shops, comparable to loans issued during the early 2000s, according to the SBA. The volume is still below the soaring numbers from 2006 and 2007.

“We are seeing numbers back to the pre-recession pace; we’re off to a start that can lead us to project a really great year for 2012,” said Bridget Bean, who oversees the Washington region for the SBA. “It’s a great sign that we have the infrastructure and the economic ecosystem here to support this kind of lending to our small businesses.”

Compared with the high loan volume between October 2010 and December 2010, the most recent figures seem low. During that period, 237 loans worth $93.6 million were doled out to area small businesses. In those days, however, borrowers flocked to lenders to take advantage of fee waivers before they expired under the terms of the Small Business Jobs Act of 2010.

“We had a flurry of activity as those waivers were wearing off,” said Sally Robertson, president of Business Finance Group, a Fairfax-based certified development company that manages SBA 504 loans, which fund fixed assets such as equipment and real estate.

Business Finance Group closed 13 SBA-backed loans totaling $5.6 million in the three months ending December 2011, a 64.3 percent drop in money from the same period a year earlier. As steep as the decline may be, Robertson said the current activity is more in line with historic norms.

“Activity is good; we’re seeing that businesses are climbing out of the recession,” she said. “Financials are improving and businesses are looking at the opportunity to grow, where they might not have considered it three years ago.”

The company remains one of the most active lenders in the region, ranking third based on the number of loans it made in the first quarter of the fiscal year. M&T Bank, the most active SBA lender in the area for fiscal year 2011, maintained its No. 1 position in the most recent quarter.

The top ranks included a mix of regional, national and community banks, including BB&T Bank, Cardinal Bank and Wells Fargo, and certified development companies such as the Business Finance Group.

“Small businesses in this area have so many different needs, from $35,000 to $5 million loans. We want to make sure we have lenders participating at all of those levels,” Bean said. She pointed out that her office has recruited seven new lenders in the past 18 months, and had 14 lenders that were inactive in 2010 jump back in the market in 2011.

The district director is keeping an eye on the progress of the re-engineered CAPLines program, which offers short-term capital. Small businesses can now borrow against purchase orders to pay for labor and materials, and no longer have to pledge all available assets.

Since rolling out the re-tooled program in October 2011, Bean says the agency has closed 76 CAPLines loans through Jan.15.

“The program is used a lot by construction firms. When you see construction pick up, it’s a fundamental indicator that the economy is getting stronger,” Bean said.

Danielle Douglas covers the banking industry for The Washington Post.
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