SBA backs roughly $30 billion in small-business loans for the third straight year


President Obama walks from the Oval Office to the Rose Garden with Janice Baker, who owns a small business in Delaware, before a speech on Oct. 21. (Charles Dharapak/AP)
October 30, 2013

The U.S. Small Business Administration supported around $30 billion in loans to small firms for the third consecutive year in fiscal year 2013, the agency announced on Tuesday.

Starting last October and running through the end of last month, the department signed off on federal guarantees backing $29.6 billion in small-business loans, down slightly from $30.25 billion last year and an all-time peak of $30.5 billion in 2011. The total number of loans, on the other hand, increased from 53,848 last year to 54,106 in 2013.

“Under President Obama, SBA lending has reached record levels and we continue to get more capital into the hands of small business owners than ever before,” Acting SBA Administrator Jeanne Hulit said in a statement, adding that continued lending demand “demonstrates the strength and resiliency of America’s 28 million small businesses as they continue to recover from the Great Recession.”

SBA loans are made by banks, credit unions and other private lenders but with a partial guarantee from the federal government. The idea is to encourage bankers to take on more small-business loans by allowing the government to shoulder some of the risk of default.

The agency’s relatively steady loan support over the past three years comes as private small-business lending has tapered off.

In June 2012, for instance, banks had $588 billion in outstanding loans to small firms, down 3.1 percent from the end of 2011. By comparison, they had $1.9 trillion in big-business loans outstanding, up 12 percent from the end of the previous year.

Meanwhile, some studies have suggested the lending decline for small firms has been happening for more than a decade.

“You start looking for where small businesses get long-term loans, and the SBA is it,” Tony Wilkinson, president and chief executive of the National Association of Government Guaranteed Lenders, an organization comprised of roughly 750 commercial lenders, said in a recent interview.

The SBA’s 2013 totals include more than 5,000 loans for $745 million under the agency’s relatively new Small Loan Advantage program, which is intended to get more small-dollar loans to firms in underserved communities, as well as 682 loans for $500 million under its CAPlines initiative, which helps entrepreneurs access short-term working capital.

One notable area of decline was in the agency’s popular Certified Development Company loan program, known as the 504 program, which offers long-term, low-rate loans to help small firms acquire real estate or large assets. In 2012, the agency signed off on $15.09 billion in 504 loans, but that number sunk to $11.7 billion this past year.

Officials blamed the decline on the expiration of what became known as the 504 refinancing option, which was temporarily authorized as part of the Small Business Jobs Act and allowed small business owners to refinance commercial real estate holdings through the program. It expired at the end of fiscal year 2012, though President Obama has proposed reinstating the option permanently in his latest budget proposal.

It remains to be seen whether the agency will be able to keep up the pace in fiscal year 2014, especially after it got off to a late start. The recent government shutdown forced the agency to shutter most of its lending operations, creating a backlog of loan-guarantee applications that officials are now working their way through.

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he runs the On Small Business blog.
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