Small Business Lending Strong but Slowing

Volume in the Small Business Administration’s flagship lending program fell for the second straight year as more borrowers qualified for conventional loans.

Lenders made $23.2 billion in 7(a) loans during the 2019 fiscal year, which ended on Sept. 30. The total was an 8.7% decline from a year earlier. The program’s volume peaked at $25.44 billion in the 2017 fiscal year. SBA officials said they had anticipated a drop-off.

While the numbers were down slightly, the SBA showed that it guaranteed over $28 billion to entrepreneurs who otherwise would not have access to capital to start, grow, or expand their small businesses.

“A strong economy is powering America’s 30 million small businesses, and the SBA’s FY19 numbers bear that out,” SBA Acting Administrator Chris Pilkerton said. “When the economy is doing well, 7(a) lenders are more willing to provide capital without the need for a federal loan guarantee.”

In FY19, SBA’s flagship 7(a) loan program made approximately 52,000 7(a) loans totaling $23.17 billion. The 504 loan program had another year of increased performance, with more than 6,000 loans made for a total dollar amount of more than $4.9 billion.

“With a strong economy and historically solid small business optimism, we know that 7(a) lenders are making loans conventionally without the SBA guarantee. We also saw a 4.3% growth in the 504 loan program due to the longer term and low fixed interest rate that the product provides to small businesses,” said Associate Administrator for SBA’s Office of Capital Access William Manger.

In FY19, there was significant growth of dollars lent in the SBA’s Microloan program, with more than 5,500 loans approved for nearly $81.5 million.

Source:  SBA/American Banker