SBA Lending Increases After Two Years of Big Declines

Small business lending is on the rise in the greater San Fernando Valley – helping firms keep their doors open and hire more employees. The number of SBA-backed loans made to Valley businesses in the last fiscal year increased 26 percent to 628, according to new data from the U.S. Small Business Administration. The dollar value of those loans rose 56 percent to $243 million. This increase follows a significant decline in SBA-backed loans in 2008 and 2009 and mirrors a nationwide rebound – primarily the result of loan enhancements put in place under the American Recovery and Reinvestment Act of 2009 and extended in the Small Business Jobs Act of 2010. At 83 loans, the Valley Economic Development Center awarded the most SBA-backed loans last year in the Valley. These loans averaging $11,749, helped many businesses stay open. “The VEDC through our SBA micro-loan products saw our demand increase significantly beyond past performance,” said Roberto Barragan, president of the VEDC, the largest non-profit lender to small businesses in the Los Angeles area. “In many cases, were making loans to existing businesses who found themselves cut out from regular commercial lending. Of the businesses we are helping, on average, each is creating two jobs, if not more.” The increases have been driven by a variety of lending institutions. In terms of value of loans, Wells Fargo Bank was among the top lending institutions, loaning small businesses in the Valley more than $15 million last year. Those loans averaged $236,520. “Wells Fargo is definitely lending,” said Marla Vasquez, the senior vice president and regional president for Wells Fargo’s Community Bank for the San Fernando Valley. “Small businesses have always and always will be an area of focus for Wells Fargo. Our commitment is unwavering and stands strong today as we help our nation through this tough economic environment. We are encouraged by this recent increase in loan demand and interpret this as a sign of economic improvement.” Rita Mitchell, the district sales manager for Wells Fargo’s Small Business Administration Lending team, said one of the bank’s loans went to Papoo’s Hot Dog Show in Burbank, helping the landmark business stay open. The diner has been featured in many movies over the years. Operating under a ground lease, the business needed money to buy the land or would have been forced to relocate or close, Mitchell said. “We were able to help them through a somewhat difficult transition to actually purchase the land the restaurant sat on,” Mitchell said. “That was certainly a good example of just one of many cases where we are not just helping them grow, but we are actually helping them survive.” Program incentives Patrick Rodriguez, spokesman for the SBA office in Glendale, said the federal Recovery Act helped spur lending because the SBA was able to raise the guarantee on its 7 (a) loans to 90 percent and waive fees on both its 7 (a) working capital and 504 owner-occupied real estate loans. Those incentives ended on Dec. 31. But the Small Business Jobs Act replaced those incentives with new ones, increasing the 7 (a) and 504 loan limits from $2 million to $5 million and micro-loan limits from $35,000 to $50,000. Gary Kishner, spokesman for JP Morgan Chase, which issued the third highest number of SBA-backed loans in the Valley last year, said the bank recognizes that small businesses drive the U.S. economy and employ more than half of all private sector workers. The bank is encouraging economic development through innovative programs such as its “Chase for Hire,” which reduced the interest rate on a small business loan for every new employee the business hires. “Small businesses are really the backbone to our economy,” Kishner said. Jobs leader Sue Malone, director of marketing at Walnut Creek-based Superior Financial Group, said small businesses are going to generate most of the jobs in the economic recovery. “The fastest growing business segment is small businesses with less than 10 employees,” Malone said. “They are the ones that are really being forgotten.” Bob Coleman, who runs the Coleman Report, an independent publication examining small business lending, said financial experts tend to focus on the number of businesses and banks that have closed their doors in recent years. “But for those businesses that have survived the Great Recession, there are wonderful stories of small businesses that have adapted by operating smarter, making better products, providing better service for their customers,” Coleman said. “Capital is still a key for small business growth. Fortunately SBA’s lending programs have also adapted and bankers are now able to lend more money to larger, small businesses who are leading us to recovery, one new job at a time.”