Small business loans up state-wide over last year

While traditional bank lending remains tight for small businesses, the Georgia district office of the U.S. Small Business Administration (SBA) reports that guaranteed lending to small business has jumped 83 percent in Georgia, from 224 loans in fiscal year 2009 to 410 loans in fiscal year 2010.

The Georgia SBA is also reporting that within the same time period, the value of small business lending rose 139 percent, from $91.6 million in the first quarter of 2009 to $218.7 in the first quarter of 2010. Local SBA officials say the increased cash flow to small businesses may be a sign that the economy is turning around.

According to Georgia SBA District Director Terri Denison, assistance to small businesses was aided greatly by the American Recovery and Reinvestment Act (ARRA) of 2009.

The stimulus bill, Denison said, funded an increase of the maximum SBA guarantee on small business loans to 90 percent — up from the 75 to 85 percent the agency normally guarantees lenders on small business loans. The bill also eliminated loan guarantee fees — which the borrower normally pays, and are 2 percent of the percentage of the loan the SBA agrees to insure.

"That means the lender has less of an exposure to risk," Denison said. "Less risk for the lender may entice them to give a loan that they normally wouldn't give during this time in the economy. Instead of [borrowers] having to pay the guarantee fee, that money can be spent elsewhere in their business.

"In the last year, we've added 24 or 25 new SBA lenders [state-wide]," she continued. "These are lending institutions that were not doing SBA loans, that are starting to do so. Given where we were a year ago, this up-tick in SBA-backed lending activity is definitely encouraging. It is a hopeful sign that our economy is starting to turn in a positive direction."

In December of 2009, Jonesboro resident and small business owner, Annette O'Banion, was able to receive a $50,000 Patriot Loan, with the help of the Clayton State University Small Business Development Center (SBDC).

O'Banion, owner of KMA Business Solutions, a business consulting firm in McDonough, as well as KMA IT, a spin-off information technology solutions firm in Mississippi, recently went into the loan market to accommodate new business opportunities, she said.

"I was able to capture a whole bunch of business at the end of fiscal year 2009 from several government contracts," O'Banion said. "When you're trying to grow like that, though, you need capital. I needed to hire people very quickly and float my payroll for 90 days before I would get paid. I used to be able to go into my bank and ask them to increase my line of credit. Nowadays, traditional banks aren't lending to small businesses. Getting the SBA loan was like Merry Christmas."

O'Banion said that much of the stimulus bill money to help small businesses hasn't made it "down to the community yet," due to the fact that "the word is just now getting out" about loan-assistance programs. However, she said the increase in SBA-backed lending in Georgia is encouraging.

"I think it's an incredible statistic," O'Banion said. "Any growth in the small business world ... is incredible. You cannot fix the problems in the economy without fixing small businesses. I think if we can sustain those numbers and improve those numbers in 2010, it shows great promise."

Kyle Hensel, area director of the Clayton State University SBDC, said Thursday that he was unable to share the number of loans secured through his office in 2009, or the number of loans that resulted in new businesses, due to confidentiality reasons. However, he said in the past few months, "We have had increased traffic in people applying for loans.

"Let's say the bank was going to lend you $100,000 and the SBA was going to guarantee 90 percent of it ... the guarantee fee would be 2 percent of the 90 percent," Hensel said. "That's the fee the stimulus bill is eliminating. When you think that some small business loans may be $1 million or $2 million, the savings can be very substantial.

"I definitely feel like these programs are having an impact locally," he continued. "It's still a challenge for small business owners to find funding. With a lot of these programs, its allows them to get through a really tough situation. Our phone has been ringing off the hook lately with people interested in starting a new business."

Denison said that since the stimulus bill was passed in February of 2009, the Georgia SBA has processed 1,370 new small business loans — 958 loans going to existing businesses and 412 going to new businesses, less than two years old.

"I think for those individuals who were in the process of starting a business prior to the recession ... these resources gave them the confidence to move forward," Denison said. "With existing businesses, it allowed them to keep their business steady. I think that we are seeing a slow thawing of the capital market ... we are encouraged by that."