The partial federal government shutdown in October took a bite out of a Small Business Administration loan program aimed at helping small employers grow.
The SBA said the number of loans approved in October in the Buffalo/Rochester region declined 32.5 percent from a year ago, to 40, and the combined value of those loans fell 61 percent, to $3.7 million.
The drop-off was anticipated, since the SBA employees who process the applications were furloughed for much of October. “We lost basically half the month,” said Franklin J. Sciortino, the SBA’s district director in Buffalo.
Even as banks continued to work with customers on applying for loans last month, SBA employees were unable to complete the process until they returned to work. As the shutdown dragged on, banks lamented the loan applications stuck in the pipeline and, by extension, the impact on economic growth.
The loans - under the 7(a) program - are 85 percent guaranteed by the federal government. The program is an important source of financing for businesses that want to invest or expand, but which might otherwise have difficulty obtaining loans. The 7(a) program gives banks reassurance to lend to them.
M&T Bank Corp. led area banks in the loans in October with 15, followed by Five Star Bank’s 11. In dollar volume, M&T was also the leader, at $1.26 million, followed by Five Star’s $777,500.
M&T said it saw a drop-off in its SBA loan volume in Buffalo as well as other SBA districts the banks operates in, amid the October shutdown.
First Niagara Financial Group had five 7(a) loans for the month, up one from a year ago, but the combined dollar value fell to $295,000 from $541,000 a year ago.
Sciortino said he believes the shutdown will turn out to have been a delay in the loan approval process, rather than a deterrent for businesses to even apply for the loans. That result could show up in the results for November.
“I’m looking for this month to be exceptionally good,” Sciortino said.