SBA lending is recovering

For the first time in memory, homegrown banks overwhelmingly topped the list of the top Small Business Administration lenders in Connecticut, as national banks scaled back their SBA loan programs in the credit crunch.

Webster Financial Corp. made the most SBA loans of any bank in Connecticut in the 2009 fiscal year ending Sept. 30, issuing nearly 80 at an aggregate value of more than $11 million. It was the second straight year Waterbury-based Webster Bank led the state in SBA lending, after making about 110 loans in fiscal 2008 for $18 million.

Statewide runner up Newtown Savings Bank made some 50 SBA loans for nearly $5 million, leading all banks based in Fairfield County.

The top eight SBA lenders in Connecticut are all domiciled here; the ninth, RBS Citizens Bank, issued fewer than 25 loans for less than $3 million, just two years after leading the state with about 350 loans for more than $23 million. Bank of America Corp., the No. 2 SBA lender in Connecticut in fiscal 2007 with more than 270 loans, made five loans in fiscal 2009 for about $1 million total.

The federal stimulus appeared to renew interest in guaranteed loan programs offered by the Small Business Administration in Connecticut and elsewhere, but not enough to lift lending levels anywhere near their totals in fiscal 2008.

SBA has two main loan programs: the 7(a) program helps companies with their working capital needs, while the 504 program provides funding for the purchase of capital or real estate.

 

In all, banks issued 250 fewer SBA loans in fiscal 2009 in Connecticut than the year before, and dollar amounts were off more than a third to just under $150 million. Nationally banks made an astounding 20,000 fewer loans, off 27 percent as measured in dollars to $13.1 billion.

 

In September, however, SBA saw its highest levels of loan activity nationally since August 2007, and Connecticut interest in SBA loan programs picked up throughout the summer.

“Our loan volume, which had been very low for quite some time, increased substantially at the end of the (fiscal) year,” said Greta Johansson, SBA”™s deputy district director in Hartford. “You have to go back to May of 2008 to find a month with a larger number of loans than we saw in each of July, August and September.”

As part of the American Recovery and Reinvestment Act, Congress allowed SBA to cut fees on its loans and raise guarantees on bank loans to 90 percent of the principal, which it said reinvigorated the secondary markets for SBA loans. Still, banks nationally issued 35 percent fewer loans, putting nearly $5 billion less into the accounts of small businesses than it did in fiscal 2008.

Those totals do not include America”™s Recovery Capital loans, created as part of the federal stimulus. Between mid-June and September, SBA approved more than 2,700 ARC loans totaling $88 million nationally. In Connecticut about seven banks issued about 20 ARC loans were issued for nearly $700,000.

SBA credits the recent escalation in activity to federal stimulus provisions that reduced fees on SBA loans and raised SBA guarantees to 90 percent, as well as actions that reinvigorated the secondary markets for SBA-guaranteed loans as especially helpful in improving access to SBA-backed credit.