SBA loan volumes decline in Ozarks

For Brad Moulder, access to a U.S. Small Business Administration-backed loan was the key to starting his business.

Moulder, owner of Amish and More Furniture through Regina Furniture LLC, opened his store at 3626 S. Campbell Ave. in the Kickapoo Corners shopping center in February empowered by a $150,000 SBA-backed loan.

“I had been 25 years in the business from Phoenix to Miami to Alaska believe it or not, and had decided to go out on my own,” Moulder said.

Selling everything from dining room furniture, to bedroom pieces, upholstery, gliders and chairs, the American-made solid-wood furniture store needed capital to become a reality. A 10-year loan guaranteed by the SBA allowed Moulder to keep some cash in pocket as the business gained its footing.

“Nowadays most commercial banks are looking for 25 to 30 percent of the loan amount as collateral upfront. With the inventory I have to carry and expenses, that’s a sizable amount of money that I couldn’t just put up and still have some leeway for the unexpected,” he said of the 8,500-square-foot store.

While the SBA and lender Liberty Bank – now Simmons First National Bank – came through for Moulder, area loan volumes and amounts were down in fiscal 2015.

According to data provided to Springfield Business Journal by the SBA, the Springfield metropolitan statistical area generated 175 loans worth $49.08 million in fiscal 2015, which ran Oct. 1, 2014, through Sept. 30. That’s down nearly 10 percent from 192 loans in fiscal 2014 worth $59.96 million. The year before, local SBA lending hit a high-water mark with $93.38 million borrowed across 223 loans.

Springfield SBA Branch Manager Suzanne Stearman said incentives in place post-recession through the American Recovery and Reinvestment Act have been removed, resulting in the decreases.

“We had 90 percent guarantees and no fees on all of the loans,” Stearman said. “During the economic downturn, that caused huge demand for the SBA.”

She said loan volumes typically increase when the economy is struggling.

“We are more in demand when the economy goes down, and when the economy goes back up you’ll see the SBA is needed less,” she said.

At OakStar Bank, the trend is positive following a dramatic increase in its SBA-loan activity. From October of last year through September, the bank secured 27 loans worth nearly $16 million in the five-county Springfield MSA, according to SBA data. That compares to seven loans worth roughly $6 million the year before, according to Travis Beazley, SBA loan manager at OakStar.

The increase coincides with OakStar’s addition of Beazley, a four-year veteran with Liberty Bank, a leader in recent years for writing SBA loans.

“It’s definitely been a focal point of ours. That’s why they’ve hired me and brought me on,” Beazley said of OakStar’s efforts to grow its SBA book of business.

The shifts among the lenders writing the loans hasn’t gone unnoticed.

“There are several banks now stepping up their activity,” Stearman said, adding she believes Simmons First National has experienced market dominance since its February acquisition of Liberty.

Simmons First National still led the pack with 33 loans during the year, though the loans’ value were about half of OakStar’s – landing at roughly $8.2 million. The Bank of Missouri wrote the third most loans in the area with 19 valued at $3.68 million.

Moulder said Liberty came highly recommended, and he was pleased with the results.

“There’s always a lot of government paperwork, but I wouldn’t loan someone a lot of money unless all the t’s were crossed,” he said.   

According to the SBA data, the largest loan in the past year was taken out by Billy and Sara Jalili, who borrowed $2.5 million through Simmons First National in April. The Jalilis have said they’re targeting a November opening of their new downtown burger restaurant, dubbed Black Sheep, in the former Bijan’s Sea and Grille site, 209 E. Walnut St., and a spring opening for their Galloway Village venture tentatively dubbed Chops at Galloway. The Jalili family, including Mike Jalili, also operates Flame Steakhouse and Touch Restaurant in Springfield. Billy and Sara Jalili did not respond to calls for comment.

Other notable Springfield-area SBA-backed loans during fiscal 2015 included a $2.5 million loan to Queen City-based exporter International Division Inc., a $2.38 million loan to Ozark Mountain Granite & Tile Co. and a $1.14 million loan to Burgess Aircraft Management LLC.

During the last year, OakStar secured participation in the SBA’s Preferred Lenders Program, helping it drive up loan activity.

“It means on most deals, we can approve everything internally. It makes it a much easier process for us at the bank. There is a lot less time involved,” Beazley said. “That’s primarily why banks use it. They see a borrower and may like the repayment ability.

“They generate plenty of cash to pay for the loan, but they don’t have the collateral to fully secure the loan, which typically [means] real estate or heavy equipment.”

SBA-backed loans are particularly popular with startups or business owners in such industries as restaurants and retail.

“Startups are the big ones. Without the financial history, it’s harder for banks to gauge their risk level,” Stearman said, adding banks participating in the Preferred Lenders Program have a time advantage. “We have given them the authority to make the loan without actually needing to approve it.”

The current SBA loan review backlog is about three weeks, but if the lender filling out the application isn’t used to securing SBA loans, added follow-up questions could increase that time.

Loan averages have taken a dip in fiscal 2015, Stearman said, and may remain relatively low in fiscal 2016 because the SBA is offering no-guarantee fees for loans at $150,000 or less. The average loan in fiscal 2014 was roughly $288,000, which compares to $312,000 in the previous year.