SBA lending rebounds

The SBA loan – a key source of funding for new businesses – is regaining popularity.

Fueled in part by the American Recovery and Reinvestment Act, the Small Business Administration’s Richmond District guaranteed 33 percent more loans in the most recent quarter compared with the same time last year.

SBA lending is important for the local economy because businesses that can’t get SBA financing are generally not going to get it from other sources. For example, two local companies that relied on SBA loans during a stage of their growth are the upscale restaurant The Boathouse at Rocketts Landing and Romp ‘N Roll, a chain of kids gyms.

The local SBA office helped banks write 182 loans for $45.4 million through its lending programs, a sharp increase from 126 loans for $25.8 million offered in the same quarter a year ago. But those figures are still well below the 243 loans for $59.2 million in the same quarter in 2007 – before the recession.

The growing popularity mirrors a rise in SBA lending nationwide. SBA reported 12,393 loans for a total of $3.8 billion in the past 3 months, up 37 percent from 9,070 for $1.9 billion in the same quarter a year before.

“The ARRA increased banks’ willingness to lend because of higher guarantees on their loans,” said Scott Dailey, an assistant loan officer at the SBA’s Richmond office.  “The act has allowed small businesses to see opportunity even in a recession.”

Enacted almost a year ago, the ARRA allows the SBA to guarantee up to 90 percent of approved loans for banks and wave guarantee fees, said Peggy FaJohn, lender relations specialist for the Richmond District SBA. Previously the SBA guaranteed 75 to 85 percent of the bank’s loan, and borrowers paid 1 to 3 percent guarantee fees based on the amount of money borrowed.

The stimulus was originally scheduled to end in November but has been extended until February.

“The plan was very popular, and we had run through funds by November,” said FaJohn.

Although up from a year ago, the most recent loan figures are down from the previous quarter, which ended in September. In that quarter, the Richmond District SBA offered 242 loans totaling $60.7 million.

For Christian Tefel, the SBA’s 7(a) lending program made starting a small business a much smoother process. With the aid of a $170,000 SBA-approved loan, Tefel plans to open a Plato’s Closet clothing store Feb. 18 in Colonial Heights.

“I went into the process hopeful I could get the money in about three to four months, which is typical for a small business, but altogether the entire loan process took only a couple months,” said Tefel.

The SBA set Tefel up with Sonabank.

“I talked to three other banks, two of which suggested going the SBA path,” said Tefel. “Other banks were not optimistic because of the economy and said to be prepared for months of processing, but Sonabank has made it pretty easy for me. The SBA’s requirements are pretty stringent these days, but the bank went above and beyond the call of duty to help me through the process,” he said.

Tefel submitted a 20-page business plan to the bank, which included three years of monthly projections for business revenue and expenses. The vice president of Sonabank then met with Tefel at his chosen location on Southpark Boulevard and compared his location to the locations of other Plato’s Closet franchises.

“I had heard horror stories about the SBA process and about how cumbersome it can be, but that’s not my experience,” said Tefel. “I had to complete 20 to 30 pages of forms, but the bank helped with most of them. I dealt only with my bank. I never talked to a government employee.”

Drew Jackson is a BizSense reporter. Please send news tips to [email protected].