Published May 2003

Report: SBA loan activity up 86% in county

By Kimberly Hilden
SCBJ Assistant Editor

Recent U.S. Small Business Administration loan activity was up sharply in recent months in Western Washington — and Snohomish County — officials at the SBA’s Seattle District Office reported.

For the first half of fiscal year 2003, which ended March 31, the Seattle District Office guaranteed 597 loans under the SBA’s 7(a) General Business Loan Guaranty program, a 74 percent increase from the year before, when 343 of the agency’s 7(a) loans were approved.

The office also guaranteed 38 loans under the Certified Development Company, or 504, loan program, an increase of 19 percent from the first half of fiscal year 2002, when 32 such loans were approved by the district office, which oversees SBA activity in 15 Western Washington counties.

In Snohomish County alone, activity for the two programs combined rose by almost 86 percent, according to the SBA, from 56 loans guaranteed during the first half of fiscal year 2002 to 104 loans approved during the first six months of fiscal year 2003.

At Snohomish-based First Heritage Bank, for example, 31 7(a) loans were approved during the first half of fiscal year 2003 — the exact number of loans approved during all of the prior year, said Walter McLaughlin, senior vice president and head of First Heritage’s SBA loan department.

“That’s due to our expanded SBA department and that we have put more focus on marketing the program and its features,” he said, referring to the bank’s addition of an SBA loan specialist and another loan processor to the department late last year.

The majority of First Heritage’s SBA-backed loans have gone to small-business owners reinvesting in their ventures, McLaughlin said, though there has been an upswing in business startups as well.

Jim Carroll, executive vice president of Lynnwood-based CityBank, said that while the bank isn’t seeing an increase in commercial loan demand, those who are coming in for SBA loans are looking to reinvest in their businesses and restructure their loans for better cash flow.

Mark Costello, chief of capital access for the SBA’s Seattle District Office, credits two factors for increased SBA loan activity regionwide: the availability of the SBAExpress loan program and the sluggish economy.

Under SBAExpress, loans are backed by an SBA guarantee of 50 percent, with banks using their own application and documentation forms in most cases. The program makes it easier and faster for lenders to provide small business loans of $250,000 or less.

“Bank of America has really embraced that as a delivery system for SBA loans,” Costello said of the bank, which ranked as the top SBA lender in the district for 2002.

As for the economy, the more challenging it is, the less likely a lender may be to make more conventional loans, so they’ll look to the SBA loan programs, which minimize some of the risk, he said.

In the case of the 7(a) loan program, the SBA can guarantee up to 85 percent of loans up to $150,000. Loans greater than that are guaranteed at lower percentage rates. The maximum loan, under SBA’s main program, is $2 million, with the government guaranteeing half of that.

Under the 504 loan program, a traditional lender finances 50 percent of the project, with a nonprofit Certified Development Company financing 40 percent through a 100 percent SBA-guaranteed debenture and the borrower taking care of 10 percent.

While SBA loan activity is up, the average loan size has dropped in Snohomish County, Costello said, from an average loan size of $253,800 during the first half of fiscal year 2002 to $194,400 during the first half of fiscal year 2003.

The drop in loan size also was seen nationwide in the SBA’s 7(a) program, with the SBA reporting an average 7(a) loan size of $239,079 during the first half of fiscal year 2002 and $165,360 during the first half of fiscal year 2003. And 504 loan size was up only slightly from the year before, from $440,143 to $454,487.

The lower loan sizes were significant — and positive, said Michele Liebes, public information officer of the SBA’s Seattle District Office.

“We are pleased that they were smaller loans, because we are trying to reach smaller businesses,” she said.

Back to the top/May 2003 Main Menu