Banks reap benefits from SBA loan participation

It's a shame when anyone chooses to hang on to initial misconceptions about using the Small Business Administration guaranteed loan programs.

So many changes have been made in the last few years that many lenders couldn't cite them. And many don't realize they can make a bit of money they wouldn't otherwise have made when they make an SBA guaranteed loan to a borrower who wouldn't otherwise have gotten a loan.

It's true. Lenders can make a small profit by applying for an SBA loan guarantee on loans of certain dollar amounts, and there are other advantages built into the lending laws:

There is a secondary market of buyers for guaranteed loans which the lender can tap to realize a greater profit and lessen risk.

Lenders often can use SBA programs to strengthen their Community Rein-vestment Act credits.

Making SBA guaranteed loans can allow the lender to leverage the amount of money the lender has available to loan to its customers, helping them to make more loans and increase their community visibility.

Building in these incentives is the federal government's way of rewarding those institutions that make a commitment to small-business growth. These profits and rewards, by a long shot, aren't enough to make the lending institutions a lot of money, but they are incentives which is what keeps the economy, and our communities rolling.

There are responsibilities that come with the incentives.

It's up to the lenders to keep the people in their lending institutions informed of the changes in policy and procedure of the SBA and how to use the changes to their advantage.

I've been talking with a number of bank presidents lately about these points. Many times their designated small business loan representative have a more difficult time apprising them of the changes than I do, given today's busy schedules. And many times the changes occur so frequently that the loan representative hasn't fully informed the president before I or someone from our eight field and branch offices makes a visit.

This isn't intended. We just live in a quickly changing world; a world where the small-business impact on the economy especially in the Midwest Heartland Region is not only vital, but growing leaps and bounds. These changes create more work for the small business loan officer.

Let's look at a lender who specializes in lending to small business ventures in the Springfield area Liberty Bank. It was this year's leader in using the SBA guarantee, and has been named the top SBA area lender in the last four years. Liberty has used guarantees on between 35 and 47 loans per year for more than $6 million in loan value each year.

Its practices represent a community lender participating to the fullest extent with SBA in helping the community thrive which isn't easy for a community bank.

They are among the 19 area preferred, or certified, lending partners, which gives them certain advantages but also obligates them to do more work on the loan throughout it's maturity.

It accepted a designation as an SBA CommunityExpress lender, which means it can offer a lower guarantee to borrowers who might have less collateral. (But, don't flock to this particular lender if you haven't saved enough money for a capital infusion into your new enterprise, because you will find that very few lenders will take this risk unless you are a very good, repeat customer with a great credit history.)

Liberty Bank is not, by any means, the only lender fully partnering with the SBA, and in this year's first quarter they are rivaled by Empire Bank and Commerce Bank in the area. We at SBA can only enjoy this competition, even though it brings with it an increased workload!

It is the wise businessperson who uses an infusion of cash when necessary to build or revive a company, and my job is to help make that businessperson's job of finding access to capital easier. As you might guess, that's why I am writing this column.

It is my hope that even more lenders will partner with the SBA to fund American dreams and contribute to the economic growth those dreams bring.

(Sam Jones is the regional administrator of U.S. Small Business Admini-stration Region VII.)