SBA-backed loan activity picking up in Mesa County
Phil Castle, The Business Times
Small business financing activity under two programs backed by a federal agency has rebounded in Mesa County, although not yet to levels seen before the recession.
While loan demand has picked up a bit as economic conditions have improved, lenders say many business owners remain hesitant to expand operations given uncertainty over the upcoming presidential election and what’s still scheduled as the expiration of federal tax cuts.
“There’s still, I think, a fair amount of that present,” said Steve Irion, market president and business banking manager for Wells Fargo in Grand Junction.
Pat Berry, a loan officer with the Community Economic Development Company of Colorado in Grand Junction, put it this way: “It’s still a little bit in flux.”
Nonetheless, the combination of low interest rates and more favorable terms continue to make loans backed by the U.S. Small Business Administration popular, said Scott Wittman, vice president at Timberline Bank in Grand Junction.
The federal government guarantee of repayment on a portion of the loan makes the program popular with lenders, too, Wittman said. “It’s just kind of a win-win situation.”
According to figures from the Colorado District Office of the SBA in Denver, 26 loans worth a total of nearly $6.9 million were issued in Mesa County during the 2012 fiscal year that ended Sept. 30.
Of that total, 19 loans worth a total of almost $4 million were issued through the 7(a) general business loan guarantee program.
Another seven loans worth a total of almost $2.9 million were issued through the 504 program to finance land, buildings and equipment.
By comparison, 25 loans worth a collective $5.8 million were issued in Mesa County during FY 2011.
Of that total, 18 loans worth a total of almost $3.7 million were issued through the 7 (a) program. Lending levels for the 7 (a) program were progressively higher in the four years before that, hitting $13.7 million in FY 2007.
Seven loans worth a total of $2.1 million were issued in Mesa County through the 504 program in FY 2011. The lending level was slightly lower in FY 2010 at $2 million.
Elsewhere in Colorado, SBA-backed financing retreated from record levels with 1,293 loans worth a total of almost $559 million issued in FY 2012.
While 1,024 loans were issued through the 7 (a) program for a total of nearly $400 million, another 269 loans worth a total of almost $159 million were issued through the 504 program.
SBA-backed lending activity surged to a record $620 million in FY 2011 with $490 million worth of 7 (a) loans and $130 million worth of 504 loans.
The latest national numbers for SBA lending weren’t yet available as of the press deadline on Oct. 9.
For FY 2011, the SBA reported backing nearly 62,000 loans worth a combined $30.5 billion. The dollar volume was the most ever for the federal agency in a single fiscal year, surpassing the $28.5 billion market set in FY 2007.
In Mesa County, Timberline Bank remained the top 7(a) lender during FY 2012, issuing nine loans worth a total of almost $2.3 million.
Wells Fargo, long a top SBA lending in Colorado and nationwide, issued two loans worth a total of more than $1 million in Mesa County.
Vectra Bank issued four loans worth a total of nearly $239,000. Bank of the West, First National Bank of the Rockies, U.S. Bank and Zions First National Bank each issued one loan.
Under the 504 program, Colorado Lending Source issued five loans worth a total of almost $1.2 million. The SBA reported that Community Economic Development Company of Colorado issued two loans worth a total of more than $1.7 million, although Berry said those numbers should be higher.
The SBA doesn’t make direct loans under the 7(a) and 504 programs. By guaranteeing repayment on a portion of the loan, however, the agency enables commercial lenders to extend loans to small businesses that might not qualify under more conventional terms.
Lenders said demand has increased for small business financing even as economic conditions have improved in the Grand Valley.
Said Irion: “I think we’ve seen a little bit of an uptick.”
Wittman agreed: “Demand has picked up. Compared to the last couple of years, it’s picked up quite a bit.”
Berry said demand for 504 loans to refinance existing loans on commercial real estate was particularly strong during FY 2012 and helped businesses cut costs through lower monthly payments. The provision of federal legislation that allowed refinancing expired at the end of September, however, and it isn’t yet clear whether or not the provision will be reinstated, she said.
Still, many business owners remain reluctant to expand operations and invest in new facilities and equipment, Irion said. The presidential election and so-called fiscal cliff of higher taxes and government spending cuts have made business owners more hesitant.
While there are signs of an improving economy, Irion said he expects only moderate growth for the next several years. “I think it’s going to be slow and steady.”
Berry said the Grand Valley has fared better than other areas of the Western Slope still feeling the effects of the recession.
Wittman agreed. “In general, I think Mesa County seems to moving in the right direction.”
For those business owners who are considering financing, the lenders said SBA programs offer benefits.
One of the chief advantages of the 504 program, Berry said, is that businesses owners can enjoy long-term, fixed-rate financing for real estate and equipment at interest rates at their lowest levels in more than 20 years. “I can’t even tell you when it’s been this low.”
Many existing businesses apply for 504 loans to help finance expansion with new or larger buildings or substantial equipment purchases. Berry said local applicants also have used the loans to finance renovations that have included energy conservation measures and solar power systems that cut utility bills.
While 504 loans are often used for middle-stage businesses, the loans also may be used for startup operations and mom-and-pop ventures, Berry said.
Irion said applicants still must demonstrate their ability to repay loans, but the SBA guarantee makes financing possible for some
Applicants who wouldn’t otherwise qualify under traditional terms. Moreover, SBA-backed loans can be extended for longer terms and require smaller downpayments. “It makes it a pretty attractive venue for financing.”
Wittman said Timberline Bank has focused on SBA-backed financing and participates in the SBA Preferred Lenders Program, which simplifies and expedites loan applicators. Since loans are evaluated in-house, they can be processed in a week and sometimes in only a day or two, he said.