SBA lending increases during credit crunch
While the financial crisis is making it harder for businesses to borrow money, lending backed by the U.S. Small Business Administration has increased significantly, particularly in the region that includes Columbia.
The SBA loan program was bolstered by reduced fees and higher guarantees, and the lending pace is expected to pick up even more this month with the injection of stimulus funding.
The SBA program does not offer loans, but it acts as a guarantee to a business seeking to borrow money from a bank. If the owner defaults on the loan, the SBA agrees to cover a certain percentage of it. With SBA backing, a bank is more likely to approve the loan.
In 2008, three banks with Columbia branches were among the top six community banks in total SBA-backed lending. The Bank of Missouri, which provided 31 loans totaling $3.5 million, was the leading lender, doubling the volume of the second-highest lender. Boone County National Bank was No. 5, providing eight loans totaling $2.25 million, and Hawthorne Bank was No. 6, issuing seven loans totaling $2.5 million.
“Boone County National Bank and Bank of Missouri can lend more money because they are community lenders,” said June Teasley, SBA regional communications director. “They were not affected as much by the national banking crisis. Many community banks were more conservative with their mortgage loans, so now they have retained more capital.”
Since President Obama signed the American Recovery and Reinvestment Act in February, the SBA loan volume has increased by more than 35 percent nationwide.
In an SBA region comprising Missouri, Iowa, Nebraska and Kansas, SBA-backed lending increased by 21 percent since March 12. But small- business owners are also dealing with higher interest rates when securing loans and are having a harder time getting credit, Teasley said.
The St. Louis District Office, including Columbia, recently increased its lending by 50 percent, District Director Dennis Melton said.
In June, the SBA received $730 million through the stimulus act to fund programs that increase the flow of capital to small businesses.
One of those loan programs, the American Recovery Capital, was implemented on June 15 and offers up to a $35,000 short-term loan to struggling businesses. The repayment of the loan does not include interest. The SBA expects to fund about 10,000 ARC loans nationwide. Each business owner is limited to one ARC loan. The loans are on a first come, first serve basis and will be available until Sept. 30, 2010.
Get a complete list of SBA loans issued to Columbia businesses from mid-2007 through May 2009