FINANCIAL
Number of small-business loans plunge by roughly 50 percent
Published: March 24, 2009, 12:30 am
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The volume of loans approved for U. S. Small Business Administration guarantees is down by about half from the same period a year ago, despite bank assertions that they’ve got money available and a willingness to lend it.
Bankers say the demand just isn’t there because businesses are battening down the hatches, and many firms’ financial condition and creditworthiness have deteriorated from what they were a year ago.
“We certainly have seen our share of financial statements that are weaker than in past years,” said Steve Brennan, first vice president of the business banking group and SBA manager at First Niagara. “If the customer can’t afford to do the loan payments, we won’t do the transactions. That’s Banking 101.”
From October 2008 through February 2009, 18 lenders made 186 loans for $17.4 million in the SBA’s Buffalo District, which includes Buffalo and Rochester. That’s down from 370 loans for $33.2 million in the same period in 2007-2008.
“It has been slow and it is down from last year,” said SBA Buffalo District director Franklin Sciortino.
M&T Bank Corp. still leads the pack, with 56 loans for $5.46 million. Commerce Bank of New Jersey made a single loan for $2 million. Otherwise, Five Star Bank of Warsaw is second in both number of loans and dollars, with 48 loans for $1.99 million. First Niagara Financial Group is third, at 30 loans for $1.7 million.
Still, Sciortino and bankers said recent government efforts to support small businesses and SBA loans are making headway, as demand has picked up in the last couple of weeks and lenders now indicate plans to push more loans through. “I’m very optimistic that we will be able to increase the lending to small businesses dramatically,” he said.
Among other things, the government increased the loan guarantee to 90 percent from 75 percent to 85 percent, and temporarily eliminated the fees borrowers must pay. The government is also injecting billions of dollars into supporting the secondary market for investors to buy up securities backed by the government-guaranteed portions of SBA loans.
“These programs that are being talked about, that all creates a little more positive thinking,” said Alfred F. Luhr III, senior vice president and group manager for business banking in Western New York for M&T, the longtime No. 1 SBA lender in the region. “With all this money coming in to the economy, hopefully there will be more projects coming in.”
Five Star also said Friday that it is now ranked 30th in the nation in SBA lending, up from 50th, after posting a 20 percent increase in total SBA loans from 52 to 67 for October through February. That includes the Syracuse district as well. It’s also No. 1 in Western New York for loans to veteran-owned firms, with five for $492,000.
“It’s actually been a little bit more active than in the last couple of years,” said Matt Murtha, spokesman for Five Star and parent Financial Institutions. He cited less competition from out-of-state banks and Five Star’s own push in commercial lending. “It’s stronger than it’s been in the past.”
jepstein@buffnews.com
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