Post-stimulus U.S. Small Business Administration-backed lending took a sharp downturn in southwest Missouri in fiscal 2013 after record volumes in 2011 and 2012. While approved loans dipped 9 percent in the 28-county area the SBA Springfield office serves, loan award averages were down by a significant 25 percent the past fiscal year.
SBA Springfield Branch Manager Suzanne Stearman said fiscal 2013 follows two years of robust loan growth where the SBA waived the guarantee fees and offered 90 percent guarantees on general business loans, or 7(a) loans, through the American Recovery and Reinvestment Act.
While the local loan average is down to $295,283, refinancing deals through the SBA’s 504 fixed-asset program inflated numbers, according to Stearman. In addition, tweaks to the small-loan program made smaller loans more attractive, she said.
“This last year, we offered the Small Loan Advantage program to all lenders, which streamlined the application process for smaller loans under $350,000. This brought our average down,” Stearman said via email.
Compared to fiscal years 2008–10, this past year’s loan average looks rosy. The fiscal 2013 loan average is 14 percent above $257,937 in fiscal 2010 and 32 percent greater than fiscal 2008.
“During those higher years, we also did a lot of refinancing in general for longer terms and lower rates, which helped area small businesses,” Stearman said, adding the local trend is mimicking national loan activity. “This is not specific to this area.”
Massage therapist Ashley McGill on Aug. 1 opened Arabella Day Spa in Republic fronted by a $156,200 SBA-backed loan through The Bank of Missouri. She said the loan – one of 351 backed this year by the local SBA office – was critical to her business plan, which included buying and remodeling the former Rodgers Realty space at 107 W. State Highway 174.
“We had to put in new floors, build the walls and do all the infill, paint, buy light fixtures and appliances – all the basics with starting a business,” said McGill, who previously worked for Clear Creek Spa.
“If I didn’t get the loan, I wouldn’t have been able to do it.”
Stearman said she expects more loans for startups such as Arabella in the next year.
In fiscal 2014, which began Oct. 1, the SBA is waiving the upfront guarantee fee on loans up to $150,000.
“Those smaller loans are important because usually that is what startups use,” Stearman said.
The waiver can amount to a couple thousand dollars in savings for an applicant because the fee is 2 percent of the portion of the loan that is guaranteed, or 85 percent of the total loan amount.
Jimmy Stilley, vice president of commercial lending at OakStar Bank, said SBA-backed loan volumes have held steady for the lender in recent years and are definitely above prerecession levels.
“Lending is cyclical, and so you are always going to see ebbs and flows, but in general, I don’t feel like we’ve seen any decline in demand for SBA loans this past year over the past two or three years. We continue to come across lots of businesses in the area that need or want to use the SBA products,” Stilley said, declining to quantify loan volumes.
According to Springfield Business Journal research, OakStar between January and May awarded two SBA loans: $2.5 million to Springfield-based exporter International Division Inc. and $300,000 to InsulUSA LLC.
While Stilley said the SBA’s push to serve more startup businesses by waiving its guarantee fee is helpful, he is skeptical the move would translate into more loans. Since fiscal 2008, SBA-backed loans in the Springfield branch peaked at 477 in 2010.
“People who want to start a business, want to start a business, so they are either going to try to overcome that fee or they’re not,” Stilley said, noting an upside. “It doesn’t strap a company with as many demands in terms of debt because they won’t incur that debt.”
Getting started is often what the government-backed loans are all about.
“I’m living the dream. I’ve been a therapist for 10 years, and so this has been a dream of mine for a while,” McGill said.
