Despite the government’s efforts and stimulus, lending programs are suffering, and small business lending programs are no exception.
The Real Small Business Lending Numbers
The numbers are quite grim and indicative of the state of the recession and of the economy as a whole: small business lenders secured 25,000 fewer loans to small business entrepreneurs in 2009 than they did in 2008.
The Small Business Administration recently ended its 2009 fiscal year, and the numbers were sadly staggering: the Small Business Administration backed just 44,221 small business loans through banks, which was 36 percent less than the number of backed loans just a year prior.
Dollar volume for SBA-backed loans also fell sharply, as loans from the fiscal year 2009 totaled $9.3 billion, which was a 27 percent decrease from last year’s $12.7 billion.
SBA Loans and the Future
Even though the SBA backs small business loans, it is important to note that they back only a certain percentage of the loan – meaning that if the borrower defaults on his or her small business loan, the SBA pays the bank back just a portion of the loan amount. This is exactly why banks still need to be assured that they have secured a trustworthy borrower, even though the loan is backed through the SBA.
These numbers come at a time when the SBA and the Congress are taking steps to ensure that loans continue to circulate for small business owners. In fact, Congress allocated nearly $730 million of February’s stimulus package to the SBA to encourage new incentives, including waiving fees and increasing its guarantee to banks regarding the backed loans. Although this move helped more than 1,200 lenders get up and running again, it clearly didn’t solve the problem as a whole.
Throughout all of this grim news, however, is optimism that the worst is over. In fact, many lenders have begun to see numbers slowly growing again. Loan programs hit an all-time low in January, when loan amounts fell nearly 48 percent from the prior year. However, when the Recovery Act provisions began in April, the volume on small business loans began to immediately increase. By September, loan volumes, as reported by the SBA, were the highest they were all year, with nearly $1.3 billion loaned to business owners.
