An increase in lending always means good news for small businesses, so it’s no surprise that entrepreneurs are excited to hear that Small Business Administration (SBA) lending is up across the nation.
New York saw a record $1 billion in small business loans for FY 2017, and it has only continued to grow since then. The SBA New York District Office reported record numbers for Q1 of 2018 – $225 million for 944 guaranteed loans.
Elsewhere, the Philadelphia region saw an increase in SBA lending in the first quarter of 2018 compared to the same time period in FY 2017, as did Illinois (13% increase in the number of SBA loans and a 22% increase in total loan amount) and Wisconsin (18% and 11.6% increases, respectively).
The economy is strong. Holiday retail sales and salaries have gone up while unemployment remains low. Businesses across the country anticipate the tax reform bill can give them even more of a boost, which is giving potential borrowers the confidence to take more risks.
Optimism around a strong overall economy, particularly for businesses considering expansion, encourages entrepreneurs to invest in new ventures and invites lenders who are open to making more deals. Typically, banks tend to offer more traditional loans and fewer SBA loans when the economy is performing well. An increase in SBA lending while the economy is doing well is a positive sign for small business owners.
And yet another positive sign: in January a group of bi-partisan, Congressional representatives introduced the Small Business 7(a) Lending Oversight and Reform Act of 2018. The loan program helps American businesses flourish, and expanding the agency’s oversight office will give the SBA Administrator authority to increase the program’s maximum lending authority if it is reached.
Chargeoffs in the program were at their lowest levels in five years at the end of FY 2017. The SBA charged off only 0.8% of $86.2 billion in unpaid principal balances from the program. The last time this rate was below 1% was 2013. The low rate is indication that SBA lenders are doing a good job in the initial steps of educating and preparing borrowers.
Lenders play an essential role in helping small businesses nationwide. SBA-backed loans give lenders the confidence to provide access to capital entrepreneurs normally wouldn’t receive.
“There’s no question that the small business financing environment is strong — and will hopefully fuel investment and growth in 2018.”