Small business lending may be warming. The Small Business Administration has backed more small business loans so far this fiscal year than it did during the same period in 2012. As of May 4, the SBA had approved about 26,000 loans through its 7(a) program, compared to about 25,000 last fiscal year.
In addition, SBA loan dollar volume this fiscal year has surpassed pre-recession levels. As of April 19, the SBA had approved more than $9.4 billion in 7(a) loans for this fiscal year — an increase from the $7.2 billion it had guaranteed at this point in fiscal year 2008.
Businesses use 7(a) loans to expand, purchase fixed assets and finance working capital.
The dollar amount of SBA-guaranteed 7(a) loans this year is still much lower than it was 2011, when the SBA approved $13.2 billion in 7(a) loans. But that flurry of activity was largely attributable to fee waivers and special provisions that were part of the Small Business Jobs Act of 2010 and expired in December of fiscal year 2011. “In 2011, we still had the Jobs Act provisions that guaranteed fee waivers, and the program was coming to an end,” says Jeanne Hulit, associate administrator for capital access at the Small Business Administration. “That really drove our volume.”
This year’s numbers look even more positive considering that the SBA is no longer offering those incentives, Hulit says. “We are at almost the same [lending levels] as fiscal year 2010 and that was a full year of 90% guarantee[s] and fee waivers,” she says. “Right now we have absolutely no special provisions and no fee waivers, and we’re exceeding last year as well as fiscal year 2010 when we had all those special incentives.”
Fiscal year 2009 is when the SBA first saw the real collapse of credit, says Hulit. “If you’re looking at the year-to-date [dollar loan volume], we’re more than double what we were in fiscal year 2009. And we’re up 14% in terms of dollars over this time in 2012. It is good news. We’re getting more access to credit to small businesses than before the recession began.”
“The economy is coming back and lenders have worked through their problems,” says Bob Coleman, editor of Coleman Report, a small business lending newsletter. “We’re a lot better off today than we were last year, two years ago and especially three years ago.”
The SBA is also backing larger loans than it has over the last few years. “Our loan numbers are a little bit flat between this year and last year because the larger dollar loans are being supported, typically to more established businesses that are growing and expanding,” Hulit says.
The SBA recently proposed streamlining the loan application process to expand access to its loan programs. Among other changes, the proposal allows certain companies that do not currently qualify as small businesses to apply for loans. It also eliminates a rule used to determine how much collateral a company needs to provide. The comment period closed on April 26.
Read additional reporting about the Small Business Jobs Act at CFO.com