SBA Loans Increase from Fiscal 2012

Many commercial real estate purchases in San Francisco and throughout the county rely on a business’s ability to secure a loan through the Small Business Administration (SBA).  This re-post of Ken Hoover’s Business Times article explains that the SBA is working on a record number of loans for Fiscal 2013:

The Small Business Administration is processing loans again now that the government shutdown is over.

That’s good news for businesses such as TL Technologies Inc., a specialty manufacturer of precision metal components in Ephrata, Pa. That company’s $1.5 million SBA loan was held up by the government shutdown, forcing it to cancel delivery of two automated machine tools that it needs to fulfill a new contract. TL Technologies still hasn’t received this loan yet, but at least it knows it will get the loan soon and won’t lose the contract.

“I know it’s coming, so it’s just a matter of time now,” said Chris Leh, president and co-founder of TL Technologies Inc.

Leh, who testified at a Senate hearing last week, is an example of how the government shutdown affected SBA lending. It inconvenienced hundreds of businesses whose loans were stuck in limbo, but it wasn’t devastating because it only lasted 11 business days.

Plus, many small businesses and their lenders saw the shutdown coming and rushed to get their loans processed by the SBA before Oct. 1, the day the shutdown began. Nearly $625 million in 7(a) loans — the SBA’s flagship program — were approved in the three days leading up to the shutdown. For September as a whole, more than $2.4 billion in 7(a) loans were approved — that’s nearly $1 billion more than were approved in August.

Lenders worked “nights and weekends” to get their loans to the SBA before the shutdown hit, said Tony Wilkinson, president of the National Association of Government Guaranteed Lenders. Most of these loans came from preferred lenders, who are authorized to approve SBA-guaranteed loans on their own. These loans could be processed quickly, because all they needed was a loan number from the SBA.

The agency began working Thursday on a backlog of about 700 7(a) loans totaling $140 million that were submitted during the government shutdown.

That’s a relatively light volume of loans — last October, for example, more than $378 million worth of 7(a) loans were approved in the first two weeks of the month.

Many SBA loans that otherwise would have been approved in October were instead moved up into September in order to avoid getting caught in the shutdown.

SBA lenders know how to play this game — there always is a rush to the bank whenever it appears there might be a shortfall in funding for SBA loans or changes that make these loans less attractive. In fiscal 2011, for example, $12 billion in 7(a) loans were approved in the first quarter alone, because lenders and borrowers wanted to take advantage of loan breaks — lower fees and higher government guarantees — that were about to expire. This huge quarter led to a record-breaking year for SBA lending.

The push for loans at the end of September contributed to another strong year for SBA lending. Through Sept. 30, the end of the government’s fiscal year, nearly $17.9 billion in 7(a) loans had been approved for more than 46,000 small businesses. That’s not the final number for the year, just gross approvals, because some prospective borrowers will decide not to take the loans. Still, that’s a big jump from the $15.2 billion in 7(a) loans that were approved in fiscal 2012.

SBA loans remain a popular source of long-term loans for small businesses — so popular that lenders work around the clock when they see a shutdown coming.

Source: SBA Loans flowing again, but big rush came before government shutdown