Outlook Favorable For Small Business Lending in 2012

Small Business Administration lending in the greater San Fernando Valley region is returning to pre-recession levels as business owners make investments in real estate and equipment. Banking professionals and SBA officials are optimistic that 2012 will continue the pattern seen last year of increased approvals for loans of higher amounts. As identified on the San Fernando Valley Business Journal’s Largest SBA Lenders List, the top 50 lenders for calendar year 2011 made $290.7 million in loans to businesses in the San Fernando, Conejo, Santa Clarita valleys and western Ventura County. The Los Angeles district office of the SBA, which includes Los Angeles, Ventura and Santa Barbara counties, financed $1.58 billion in loans to 2,477 small businesses during the 2011 fiscal year. The figure represents a 49 percent increase from the $1.06 billion in loans during fiscal 2010. The Los Angeles district is the number one SBA region based on dollar volume in the U.S., said Victor Parker, the district director. “We are still trending in that direction,” Parker said. The first quarter of fiscal 2011 was helped by changes in SBA policy that waived a 2.65 percent fee paid by borrowers and an increase to 90 percent from 75 percent of the amount the SBA would guarantee on loans. The SBA guarantees loans to small businesses from banks and other lenders as a way to minimize their risk. The two most popular types of loans are 7(a) loans, used to finance equipment, supplies, materials, new construction, existing business purchases, and short-term working capital; and 504 loans, used to acquire fixed assets for expansion or modernization. The number one lender on the List is CDC Small Business Finance Corp., a nonprofit based in San Diego with an office in Pasadena handling the L.A. area market. CDC made 40 loans totaling $31 million in calendar year 2011. The average loan was about $784,000. CDC serves small businesses that are purchasing commercial real estate rather than leasing. Small business owners are now starting to feel the recession has ended and are ready to spend money again, said Dean Aloe, a senior commercial lender in the Pasadena office. The combination of historically low interest rates and low valuations on commercial real estate make buying property an attractive alternative to leasing, Aloe said. “They want to buy and get into a building before they (valuations) start to skyrocket again,” Aloe added. Steve Doss, a regional sales manager for the Southern California SBA market with Wells Fargo Bank, uses a sports analogy to describe what he is seeing in the marketplace. Borrowers have switched to playing offense now that economic conditions have improved and are actively seeking to better their businesses, Doss said. While the number of total loans from Wells Fargo went down to 42 in 2011 from 64 in 2010, the average loan amount increased to $421,000 from $236,000. The loan amounts had been less because business owners were opting to improve their existing locations or equipment rather than buy, Doss said. “Now they are growing and expanding into larger building and those numbers will (go) up with more and more lending,” Doss added. The broad diversity of industry in this region creates an environment encouraging to entrepreneurs and small businesses that turn to the SBA for financial help, Parker said. He credits collaboration between government and private business. “The cities are all pushing for small business growth,” Parker said. “It is an effort not only of the private sector but the public and nonprofit sectors.” Download the 2012 SBA LENDERS list (pdf)