Who says banks aren't lending to small businesses?
Data released Wednesday by the U.S. Small Business Administration shows that banks are willing to finance small businesses — as long as the loans are backed by a government guarantee.
Banks, credit unions and other SBA-certified lenders made $30.5 billion of SBA-backed loans to small businesses and startups in the fiscal year ended Sept. 30, the highest volume in the agency's 58-year history.
In the first quarter alone, lenders made more than $12 billion of SBA-backed loans, the most ever in a single quarter and more than double the dollar volume in any quarter over the last four years.
The numbers do not necessarily suggest that overall loan demand, which has been weak for several years now, is on the rise. SBA loans represent just a fraction of banks' total small-business lending, and many banks are still being extra cautious about originating loans that are not government-backed.
Still, by SBA standards, it was a momentous year, with total loan volume increasing 35% year over year and 70% higher compared to fiscal 2009.
Karen Mills, the SBA's administrator, attributed the surge in volume largely to the passage last year of the Small Business Jobs Act, which included a number of provisions aimed at stimulating SBA lending.
Most notably, the law widened the pool of eligible borrowers and increased the maximum size of the SBA's 7(a) and 504 loans from $2 million to $5 million. It also temporarily extended a program implemented at the height of the financial crisis that reduced fees for borrowers and lenders; temporarily raised the maximum government guarantee from 80% to 90% of the loan balance; and temporarily allowed for refinancing of commercial real estate loans if the business owner occupied the property. Typically borrowers can only use the SBA's programs for new real estate loans.
"Due to the Small Business Jobs Act and a return to pre-recession lending levels, over 61,000 small businesses had access to capital," Mills said in a news release Wednesday.
In all, the lenders made 61,689 loans last fiscal year, including 53,706 loans under its 7(a) program.
The SBA said that the total included roughly $5.8 billion of loans to more than 16,000 startups, the most since fiscal year 2008.
