Lending levels: SBA financing activity rising, but not to pre-recession levels

Nearly three-quarters of the way through the 2011 fiscal year, a total of 20 loans worth a collective $4 million has been approved in Mesa County through two programs backed by the U.S. Small Business Administration.

Those who work with SBA programs say lending activity has picked up, especially among larger businesses taking advantage of low

long-term interest rates and falling real estate prices to expand their operations. Activity has yet to rebound to levels seen before the recession, however.

According to the SBA Colorado District Office in Denver, 15 loans worth a total of almost $3.2 million were issued in Mesa County under the 7 (a) general business loan guarantee program between the start of the 2011 fiscal year on Oct. 1, 2010 and June 17, 2011. Five loans worth a combined $890,000 were issued through the SBA 504 program to finance land, buildings and equipment.

For the entirety of the 2010 fiscal year, 25 loans worth a total of nearly $5.9 million were issued in Mesa County under the 7 (a) program. Another five loans with a combined dollar volume of just over

$2 million were issued through the 504 program.

The SBA doesn’t make direct loans to business. But the federal agency’s guarantee authority enables lenders to extend financing to businesses that might not qualify under more conventional terms.

Statewide, the SBA has backed 908 loans worth a total of almost $381 million through the 7 (a) program. The dollar volume of those loans already exceeds the $350.6 million in 7 (a) loans approved for the entire 2010 fiscal year and approaches the $389 million in loans approved in FY 2008.

So far in FY 2011, the SBA has approved another 176 loans worth a total of $85.2 million through the 504 program. In FY 2010, the agency approved 205 such loans worth a collective $106.6 million.

For FY 2010, Wells Fargo Bank remained the top

7 (a) lender in Colorado, issuing 203 loans worth a total of almost $50.5 million. U.S. Bank ranked second with 138 loans worth nearly $15 million. Vectra Bank Colorado issued 26 loans worth a total of nearly $7.8 million, Bank of Colorado issued 10 loans worth a total of nearly $5.7 million, American National Bank issued 10 loans worth a total of more than $1.5 million and Timberline Bank issued eight loans worth $2.8 million.

Among the certified development companies involved with 504 loans, Colorado Lending Source ranked first for FY 2010 with 146 loans worth a total of nearly $78.3 million. CEDCO issued 26 loans worth a total of almost $17.3 million.

Nationwide, the SBA reported that a total of 54,833 loans worth a collective $22 billion were backed through its two primary lending programs during FY 2010. That compares to 47,897 loans worth a combined $17 billion approved in FY 2009.

The number of loans issued in FY 2010 increased

14 percent over the previous fiscal year, while the dollar volume of loans increased nearly 30 percent.

SBA lending activity had dropped sharply as the recession slowed loan demand and lending standards tightened. Activity increased, however, after provisions of federal stimulus legislation enacted in February 2009 waived fees and increased guarantee levels.

Provisions of the Small Business Jobs and Credit Act enacted in September sets the 7 (a) and 504 loan guarantees at 90 percent and reduces fees for those programs. In addition, the new law permanently increases maximum loan sizes to $5 million for the 7 (a) program, $5.5 million for the 504 program and $50,000 for the micro loan program.

Steve Irion, Wells Fargo community bank president for the Grand Junction and Clifton markets, says SBA lending activity for the bank has increased in Colorado.

As of the end of May, Wells Fargo had issued 160 SBA-backed loans worth a total of $59.6 million, Irion say. Through the end of April 2010, the bank had issued 103 loans worth a combined $36 million.

Irion says most of the increased lending activity likely has occurred elsewhere in Colorado rather than in Mesa County. The Grand Valley experienced the full effects of the recession later than other areas of the United States and Colorado and subsequently has been slower to recover, he says.

Moreover, many business owners remain wary about expanding operations given high unemployment rates and cautious consumers less likely to spend their money, he adds.

Nonetheless, some businesses are taking advantage of falling real estate prices and the low long-term interest rates offered by SBA lending programs, Irion says.

Wells Fargo has become a leading SBA lender not only in Colorado but also the United States because it draws on the expertise of staff who work only with SBA programs, Irion says. “That’s proved to be very effective.”

Mell Taets, vice president of Timberline Bank, says SBA lending activity for the bank has increased “substantially” for a mix of programs.

The variety of SBA-backed lending programs and their various provisions offer options for almost any business looking for capital, Taets says. “We can find a program to pretty much fit any business.”

Timberline operates locations in Grand Junction as well as Aspen and Montrose. Most of the SBA lending activity has occurred in the Grand Valley, however, Taets says.

While some businesses are expanding their operations, others are using SBA-backed programs to restructure financing, he says.

Timberline Bank recently was accepted into the SBA Preferred Lenders Program, which simplifies and expedites the application process, Taets says. Since Timberline evaluates loans in-house, that process can be shortened from up to two months to one or two weeks, he says.

Sean Avery, a loan officer with CEDCO, says 504 loan activity in Colorado has increased compared to the recession years, but hasn’t yet rebounded to pre-recession levels.

While the number of 504 loans issued in Colorado hasn’t increased dramatically, the average dollar volume of those loans has grown, Avery says.

Larger, well-established businesses are taking advantage of lower real estate prices and the low, fixed interest rates offered by 504 loans to expand operations, Avery says. At the same time, banks that used to offer conventional loans for such projects increasingly have turned to the 504 program because of greater security offered by the SBA guarantee and first-lien positions on the properties.