SBA-Backed Lending to Small Businesses Sees Record Year

SBA Administrator Karen Mills

The Small Business Administration reported more than $30 billion in lending to 60,000 businesses for its fiscal year that just ended, an all-time record for the 60-year-old agency. But private sector lending still lags behind for smaller-scale businesses.
And many federal enhancements to SBA-backed loans, including fee waivers and higher guarantees,  have expired, prompting SBA lenders to urge reinstatement of the improved terms.
Karen G. Mills, SBA Administrator, told members of the House Committee on Small Business yesterday that hundreds of lenders have reinstated SBA lending since the financial crisis. Propelling the expansion was Recovery Act provisions that helped reduce or eliminate some fees and temporarily push guarantees on some SBA loans to 90 percent.
“We brought 1,200 lenders back to SBA lending who had not made an SBA-guaranteed loan since 2007,” Mills told the panel. “Congress extended these provisions six times, including this quarter last year which was our highest ever. Overall, since 2009, we have supported $70 billion in lending to about 150,000 small businesses and provided secondary market liquidity.”
However, Mills faced GOP opposition and criticisms that too much regulation, requirements and paperwork is hindering private sector lending.
“We’ve made slight progress over the last year, but there is still a very large gap,” said Mills, who used her testimony to tout President Obama’s $447 billion jobs proposal.
Mills argued that the jobs bill is favored within the small business community because of the expansion of the payroll tax cut that would lower employers’ tax burden.
“Right now, we’re embarking on another critical year in SBA lending,” Mills said. “We will continue to leverage our existing authority and fill market gaps so that entrepreneurs and small business owners can continue doing what they do best – create jobs.”
Lynetta Tipton Steed, head of Business & Community Banking at Regions Financial, told the committee that there is a need for “greater certainty” with SBA programs, especially those implemented during in the credit crunch aftermath. Some, including Dealer Floor Plan Pilot, Patriot Express, larger loan amounts, and the re-invention of CAPLine, are starting to gain traction, she said.
“Small businesses and SBA-approved lenders are all facing economic and regulatory uncertainty and would benefit from greater certainty in the loan programs provided by the SBA.,” Tipton Steed said.
The Regions executive was referring to enhancements provided under last year’s Small Business Jobs Act that allowed the SBA to raise the guarantee on its 7(a) loans to 90 percent and waive certain fees on both 7(a) and 504 loans.
The government’s guarantee increased to 90 percent, from 75 or 85 percent for all 7(a) loans, regardless of loan amount. Previously, original loan amounts of more than $150,000 or more were guaranteed at 75 percent. Original loan amounts of less than or equal to $150,000 were guaranteed at 85 percent.
These enhanced government guarantees and fee waivers were effective until January 1, 2011, at which time they reverted back to original levels.

5 thoughts on “SBA-Backed Lending to Small Businesses Sees Record Year

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  • October 28, 2011 at 10:20 am

    The SBA definition of “small” precludes this data from being of any value in determining support of true small business.
    The SBA defines “small” as any business with fewer than 500 employees, which constitutes 99.8$ of all employee-based businesses and 99.98% of all businesses, a constituency so broad that such data has no meaning. It’s no different than saying everyone under seven feet tall is “short”.
    So when the SBA trumpets “we’ve helped small businesses”, or in this case a record number of small businesses, what they are saying is “we’ve helped a very small percentage of businesses that are under seven feet tall. Most of the businesses we help are actually quite large.”
    By the SBA’s own admission, the #1 job growth sector is businesses with 1-9 employees and the #2 job growth sector is businesses with 10-19 employees. Yet the SBA is largely focused on businesses from 50-500 employees. The overwhelming percentage of the above loans almost certainly went to very large corporations over 100 employees, but they get to put out press releases like the above to make true small business owners think they are paying attention.
    Not so much. They’re actually making it harder for you to compete by giving all these loans to larger businesses to help them get even larger.

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