SBA-backed lending levels fall in Mesa County

The dollar volume of loans backed by the U.S. Small Business Administration continued to declined in Mesa County during the 2010 fiscal year even as lending activity elsewhere in Colorado rebounded.

Some business owners took advantage of fee waivers and higher loan guarantee levels to obtain SBA-backed financing — benefits extended under recently enacted federal legislation. But other business owners remain reluctant to borrow money given continued economic and political uncertainty.

“There’s still a lot of uncertainty that’s out there,” says Steve Irion, Wells Fargo community bank president for the Grand Junction and Clifton markets. “Borrowers are still pretty hesitant to make that leap of faith.”

The SBA does not make direct loans to businesses. But the federal agency’s guarantee authority enables lenders to extend financing to businesses that might not qualify under more conventional terms. The SBA backs most loans through its 7 (a) general business loan guarantee program and 504 program to finance land, buildings and equipment.

According to the SBA Colorado District Office in Denver, 25 loans worth a total of $5,878,600 were issued in Mesa County under the 7 (a) program during the 2010 fiscal year that ended Sept. 30. Five loans with a combined dollar volume of just over $2 million were issued through the 504 program in the county.

By comparison, just 12 loans were approved through the 7 (a) program in Mesa County during FY 2009, but the collective value of those loans was slightly higher at $5,956,100. Six loans worth a total of almost $5.5 million were approved through the 504 program.

Elsewhere in Colorado, SBA loan approvals rebounded in FY 2010. The agency backed 1,198 loans through the 7 (a) program worth a combined $350.6 million. The agency approved another 205 loans through the 504 program worth a collective $106.6 million.

In FY 2009, 880 loans worth a total of $232 million were approved through the 7 (a) program and 193 loans worth a combined $98 million were backed through the 504 program.

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 and American National Bank issued 10 loans worth a total of more than $1.5 million.

Among the certified development companies that issue 504 loans, Colorado Lending Source ranked first for FY 2010 with 146 loans worth a total of nearly $78.3 million. Community Economic Development Co. 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. Weekly loan volume in FY 2010 averaged $333 million, an increase of 29 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. The maximum loan size was temporarily increased to $1 million for the SBA Express Loan program.

Keith Hoyt, a senior vice president and regional manager of the SBA sales division at U.S. Bank, attributes increased lending activity in Colorado in part to fee waivers. In addition, though, Hoyt says there have been signs of economic improvement — along with growing interest in acquiring businesses, real estate and equipment. “We’re very busy here in Colorado.”

Irion agrees that fee waivers that can amount to up to tens of thousands of dollars on large loans has prompted interest in SBA financing. “That makes a big difference when you don’t have to write that check.”

Other provisions of SBA loan programs — in particular government guarantees and longer terms — allow businesses to obtain financing they wouldn’t receive under conventional terms, Irion adds.

Pat Berry, a loan officer with the Small Business Finance Corp. who helps arrange 504 financing in Western Colorado, also says the fee waivers and other provisions have bolstered interest, some from business owners who otherwise would have delayed expansions. “It brought a lot of people out of the woodwork that were going to postpone construction.”

About half of the lending activity in which she was involved occurred in the Grand Valley, Berry says, with additional activity in Delta, Montrose and Steamboat Springs. There’s been less activity in smaller, rural communities, she says.

Irion, Hoyt and Berry all expect the newly enacted provisions to continue to spur interest in SBA lending, although it’s less clear about the exact extent.

Irion says the combination of the new provisions and historically low interest rates should bolster loan demand.

Hoyt says it’s too early to predict the full effects of the new legislation on SBA lending, but the new provisions should help.

Berry says the new provisions of the 504 loan programs combined with the tax incentives available for energy efficient  construction and solar energy systems make now a good time to make such capital investments.

One provision of the new law that allows refinancing under the 504 program also could help businesses whose traditional loans have been called by banks, she says.

Overall, though, a lot still depends on the economy.
While the national recession officially ended in June 2009, the Grand Valley tends to lag behind other areas of the state and nation in entering into downturns and subsequently recovering from them, Irion says. “I don’t think it’s ended here yet.”

While some sectors of the local economy, including the energy sector, have improved, others haven’t, Irion says. The construction sector has been particularly hard hit by the recession. And the prospects for 2011 don’t appear much different than what’s occurred in 2010, he adds.

Berry foresees growth, but at a slow pace. “I think we’ll grow, but I think it will be very slow.”