For the fourth straight year, Webster Bank was the most active lender in Connecticut as ranked under the Small Business Administration”™s guaranteed loan programs, but TD Bank loaned more money than any other bank under SBA’s 7(a) program for working capital loans.
Waterbury-based Webster Bank issued 70 loans in Connecticut in fiscal 2011 under the 7(a) program for a total of $17 million, while TD Bank made half that number but for a larger total amount at nearly $19 million.
The SBA does not break out SBA loans at the county level. Among local community banks, Fairfield County Bank led with nearly 40 loans totaling more than $5 million under the 7(a) program.
By obtaining an SBA guarantee, lenders can recoup 90 percent of a loan”™s principle if a borrower defaults, making it an attractive option for banks lending to small businesses with a risky profile.
Thanks in part to increased guarantees and lower fees coupled with a recovering economy, Connecticut banks increased SBA lending 40 percent to $224 million for the fiscal year ending Sept. 30, as measured by dollar volume. That outpaced the 35 percent increase banks nationally produced in SBA lending, to a record $30.5 billion. The total for 2011 also included $5.8 billion in loans to more than 16,000 startup small businesses nationally, the most in three years.
The SBA does not furnish local default data on past loans it has guaranteed.
The agency created two new lending programs in the 2011 fiscal year: Community Advantage and Small Loan Advantage. The Advantage lending programs provide streamlined applications for loans under $250,000 to get lenders to issue such micro loans, with the goal of increasing lending in underserved communities.
Community Advantage also allows community development banks to issue the SBA”™s standard 7(a) loan for working capital, with those institutions typically focused on SBA 504 loans used for larger capital or real estate purchases.
“A little over a year ago they made it much easier for companies to qualify,” said Joe Vanella, who oversees SBA lending in Connecticut for Wells Fargo Bank. “It”™s nice and simple now (to determine) who qualifies and who doesn”™t, based on net worth and net income. ”¦ That is somewhat of a myth out in the marketplace ”“ that (SBA loans) are cumbersome and difficult to access.”
The SBA totals arrived as Vice President Joe Biden announced 13 large banks would make a total of $20 billion available for small-business loans and as the U.S. Treasury”™s Small Business Lending Fund expired Sept. 30. Set up with the promise of funneling $30 billion into the U.S. economy through community banks, SBLF ended up approving applications from just over a third of banks that applied to tap funds for $4 billion total. In Fairfield County, just one company won approval to lend money under the program: Financial Group Inc., which owns Bank of New Canaan, Bank of Fairfield and Stamford First Bank, which combined hold just over 1 percent of the county”™s deposits.
At a jobs summit in Hartford this month convened by Gov. Dannel P. Malloy, an economist advised state policymakers to find ways to boost bank lending, on grounds other sources of financing remain constrained.
“Many small businesses were started up with capital that came from ”¦ home equity lines of credit or even credit cards,” said Steven Cochrane, director for Moody”™s Analytics. “That kind of credit would be much, much more difficult to come by going forward ”¦ What that means is that bank lending ”“ traditional bank lending ”“ actually will probably take on a greater role in terms of financing businesses and jobs.”
