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SBA Still Doing the Heavy Lifting in Small Business Loans

By | 11.01.13

SBA Still Doing the Heavy Lifting in Small Business Loans

The Small Business Administration continued to prime the pump of small business activity in the past year, increasing the number of loans it funded while nearly maintaining its total loan level from the previous two years.

As J.D. Harrison reported in an Oct. 29 story on washingtonpost.com, the SBA announced that it had awarded nearly $30 billion in loans for a third straight year. According to Harrison, the SBA funded $29.6 billion in small business loans for the fiscal year just ended. That is down slightly from the $30.25 billion loaned in 2012, and from the record high of $30.5 billion in 2011.

The sheer number of loans increased in FY 2013, however, to 54,106. The agency funded 53,848 loans in 2012. The increase occurred against a headwind of tightening purse strings in the private sector, where many small business owners still find bank loans hard to come by. As Harrison noted, institutional lending to small business in 2012 was off by 3.1 percent from the 2011 level, while lending to big business increased by 12 percent in the same period.

Banks held some $588 billion in outstanding small business in FY 2012. By comparison, outstanding big business loans totaled $1.9 trillion.

SBA loans are originated by banks and other private lending institutions, but are partially guaranteed by the agency. The program was established with the hope that with government assuming some of the risk, banks would do more small-business lending. Since the economic downturn of 2007-2008, private institutional small business lending has been in full retreat, and some studies suggest that trend has actually been the norm for the past 10 years. That fact alone makes the SBA the major player in small-business funding.

“You start looking for where small businesses get long-term loans, and the SBA is it,” Tony Wilkinson, president and chief executive of the National Association of Government Guaranteed Lenders, told Harrison.

Whether the SBA lending trend continues in the current fiscal year is very much at issue due to the recent government shutdown, Harrison reported. The agency had to stop most of its lending activity during the two-week shutdown, creating a backlog of applications.

Reference:

Harrison, J.D. “SBA backs roughly $30 billion in small-business loans for the third straight year“, Washington Post. 10/30/2013.

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