A Little Perspective on SBA Lending
There's no question that the SBA lending market is better now than it was during the depths of the recession, but that's not saying much, and in fact the market for government-backed loans has a long way to go to come close to meeting pre-recessionary levels.
We are getting ready for our annual Franchise Finance & Growth Conference, to be held next week in Las Vegas, but this is something of a preview to what will be heard at the conference: that the lending market remains tight even as it improves.
Consider these numbers from the SBA's 7(a) loan program. Between 2004 and 2007, the SBA guaranteed an average of 93,481 loans each year. In 2008, the SBA guaranteed just 69,441 loans, a drop of nearly a third from 2007. In 2009, lending fell off a cliff: the program guaranteed just 41,273, loans, and some of those were made when the administration pumped the program full of loan-encouraging incentives.
Suffice it to say, lending is up. But in 2011, when the loan program allegedly spiked because the government guaranteed 90 percent of a loan made through the program while it waived the fee borrowers paid, the SBA only approved 53,688 loans. The number of loans fell last year, to 44,358.
In other words: the federal government guaranteed only 3,000 more loans during its most recent fiscal year than it did during the year lending cratered in 2009. That's just 7.4 percent more loans.
For what it's worth, these numbers look much better when you analyze the actual value of loans made. The government guaranteed $19.7 billion in loans in 2011, the spike year. That was 27 percent higher than the pre-recession high of 2005, when the government guaranteed $15.4 billion in loans. But total value fell again last year, to $15.2 billion. Why the difference? Average loan size doubled, thanks largely to the government's decision to increase the SBA loan limit to $5 million. Fewer loans are getting made to larger borrowers.
The result of all this is a changed SBA market. Borrowers who need more money, and who used to get conventional loans, now go through the SBA. So the market has shifted toward larger-value loans, leaving smaller borrowers to use other sources of funding.