Bank of America said August was its best month ever for Small Business Administration lending and that a new program aimed at helping women and minority entrepreneurs secure commercial mortgages could help push production higher in 2023.
According to Steve Turner, who heads SBA lending for BofA, its August 7(a) activity set records for both dollar volume and numbers of loans. Through the first 11 months of the agency's 2022 fiscal year, which began Oct. 1, 2021, Bank of America closed 427 7(a) loans; they totaled $176.4 million, up 44% from fiscal 2021. Bank of America's 504 lending is up 14% in the same period.
Turner, who took over as SBA head in January, said he and his team were satisfied with Bank of America's fiscal 2022 results, but made it clear there remains plenty of room for improvement. "I still think we can do more," Turner said in an interview.
Despite its status as one of the nation's preeminent small-business lenders, Bank of America's SBA business has rarely stood out in recent years. Indeed, for all fiscal 2021 — a record-setting year for SBA — the $2.4 trillion-asset Bank of America ranked No. 53 among 7(a) lenders; it reported 303 loans for $157 million.
This year, Bank of America has enhanced its SBA product line and increased its staff, Turner said, adding the changes have "definitely helped" boost bottom-line results.
The just-launched commercial down-payment program offers grants up to $25,000 to women and minority business owners seeking to use the 7(a) or 504 programs to purchase property, which is likely to push Bank of America's SBA numbers higher still. There is currently no cap on spending under the program, which was
BofA has launched two programs, one focused on increasing homeownership for Black and Hispanic Americans, and the other on small businesses owned by women and minorities that buy commercial real estate in federal opportunity zones.
The down-payment program's goal, according to Jill Calabrese Bain, small-business integration and transformation executive at Bank of America, is to stimulate business activity and growth in disadvantaged neighborhoods — creating economic mobility and generational wealth opportunities entrepreneurs can share with their families.
Over half of women and Black business owners "report not having the same access to capital as other groups," Calabrese Bain said. Bank of America opted for a grant over a loan program because down payments typically constitute one of the biggest barriers blocking cash-strapped entrepreneurs from moving forward with their business plans, she added.
"They sometimes struggle with the up-front cash burden," Calabrese Bain said. "It's easier to provide an affordable, economic solution."
Going from rented facilities to a building they own is a key milestone on the path to expansion for many small businesses, Turner said. "The less money they use for a down payment, the more entrepreneurs can put toward growing the business."
The 7(a) program — under which SBA guarantees small-business loans made by banks, credit unions and a small group of nondepository lenders — is enjoying a banner year, with approvals topping $23 billion between Oct. 1 and Sept. 2. Even so, activity is still running behind the record pace set in fiscal 2021, when the government waived user fees and subsidized some monthly payments as part of its COVID relief efforts.
The 504 program, which focuses on CRE loans, as well as big-ticket equipment purchases, has already broken its annual record, approving 8,705 loans for $8.6 billion through Sept. 2.
Those numbers are likely to climb in fiscal 2023, which begins Oct. 1, as inflation and rising interest rates hit businesses that might have previously qualified for conventional financing, Turner said.
