The Agenda
How small-business issues are shaping politics and policy.
The Small Business Administration did record business in 2011, guaranteeing more money in loans to small companies than in any year in its history. But the very smallest businesses, seeking the smallest loans, had more trouble getting an S.B.A. guarantee than in 2010.
In all, by the end of the S.B.A.’s fiscal year, on September 30th, gross loan approvals reached $19.6 billion in the agency’s general business, or 7(a), loan program and $4.8 billion in capital investment loans issued in what’s known as the 504 program. In just the first quarter of the year (the last three months of calendar year 2010), the agency approved $9 billion in 7(a) loans, nearly as much as it had approved in all of 2009. Gross loan approvals, which reflects totals before canceled loans are subtracted, is how the agency commonly reports its lending statistics.
After accounting for the portion of 504 loans not guaranteed by the government, the agency said it had supported $30.5 billion worth of small-business borrowing in 2011, surpassing the record set in 2007 of $28.5 billion. The total is 35 percent more than the figure for 2010, when loans with S.B.A.-backing totaled $22.6 billion.
“We are back at the weekly S.B.A. loan levels we saw before the recession hit,” said S.B.A. Administrator Karen Mills, in a conference call with reporters, “even without the special provisions that helped us fill the gap in these past few years.”
Ms. Mills was referring to stimulus provisions that increased the guarantee on regular 7(a) loans from 75 percent to 90 percent and slashed fees in both loan programs and which undoubtedly buoyed lending in the first quarter. Those provisions expired in May 2010, and Congress did not renew them until September, when it passed the small-business jobs bill — but even then, it extended the more generous terms only through the end of December. Industry observers say that both pent-up demand from the summer and fear that the provisions would not be renewed again drove much of the lending early in the fiscal year.
The S.B.A. tracks its lending across different types of loans as well as to different types of borrowers, and most of these groups showed some increase over 2010. But one case is a conspicuous exception: the number of 7(a) loans of $150,000 or less actually fell by about 13 percent. Meanwhile, the total amount borrowed with these smaller loans fell by less than 2 percent — meaning that even the smallest loans are getting bigger. In fact, across all traditional 7(a) loans (excluding smaller Express loans), the average loan size nearly doubled, to $624,000.
Last year’s small-business jobs bill raised the maximum loan available under several different S.B.A. programs — in the 7(a) program, the limit went from $2 million to $5 million — and also allowed bigger businesses to participate in the program. It would make sense, then, that smaller borrowers might get squeezed — with bigger loans, banks make more money for the same amount of work. And institutions set goals among different types of lending by total loan volume, not the total number of loans.
Ms. Mills suggested in the conference call that the higher loan limits did not really affect the average loan size. Instead, she said, “the bulk of the increase came in the midsection, actually, in the $350,000 to $1 million loan size,” and added that the agency is studying the data to account for this increase. She did not address whether larger companies were taking advantage of the program. But, she acknowledged, “one of the gaps we are concerned about is the lack of loans in the smallest dollar level.”
Incidentally, the S.B.A. nearly exhausted its legal authority to guarantee loans before the fiscal year ended. Each year, Congress authorizes a maximum amount of lending; in 2011, the cap on 7(a) loans was $17.5 billion. At about 5 p.m. Eastern time on September 30th, agency officials concluded they were too near the cap to continue financing loans. According to a spokeswoman, Hayley Meadvin, 44 loans that had been submitted by banks on Friday for final approval were held over the weekend until Monday morning — and fiscal year 2012 — before they were finally financed. In the end, the agency approved $17.4 billion in guarantees (after subtracting canceled loans from the gross total).
The authorization limit set by law is usually theoretical — lending had never before come close to the cap, according to agency officials and industry watchers. Separately, Congress typically appropriates some money to help subsidize the loans, which are mostly paid for by borrower and lender fees. This constitutes a more concrete limit on lending; but while the agency has occasionally run out of subsidy and had to stop making loans, that did not happen this year. However, if current trends continue, it could happen this fiscal year. For 2012, the Obama administration proposed reducing the subsidy appropriation to $16.5 billion, in an effort to cut $11 million from the agency’s budget.
In the conference call, Ms. Mills said the administration had no plans to revisit the subsidy limit. “We believe that looking at the loan volumes that we have, that this is the right number to have as our limit,” she said. “You don’t want to ask for more than you can actually use, because you want to use all taxpayers’ dollars as effectively as possible.”
Article source: http://feeds.nytimes.com/click.phdo?i=50f32a40144af8cbc9ffc95bbf0dd82f
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