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Sunday, 25 October 2015 22:00

SBA lending in Michigan reaches record level in FY 2015

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A good economy and participation from more banks across the state drove U.S. Small Business Administration lending to a record level in the last year.

The SBA backed 2,485 loans totaling $663.7 million through its primary 7(a) lending program in the 2015 fiscal year that ended Sept. 30. That’s a new high in the annual number of 7(a) loans and compares with 2,145 loans for $602.7 million in the 2014 fiscal year.

Romy Ancog, a lender relations specialist with the SBA’s Detroit district office, credits the “huge increase” in 7(a) loan volume to the state’s economy during the past year that had a “large role” in driving up demand from prospective borrowers.

“There’s more opportunity for businesses and startups to grow and that leads to a greater need for capital,” Ancog said.

More financial institutions in Michigan are using the SBA 7(a) program – 145 in the 2015 fiscal year, versus 130 in the prior year. Ancog also has noticed an increase in credit unions participating in SBA lending programs, as more become involved in commercial lending.

Consolidation among banks and credit unions that Ancog at one point thought would cut the use of SBA lending programs has actually had the opposite effect. Mergers have resulted in a higher concentration of SBA lending expertise within a bank or a credit union, making them more apt to use a federal lending program.

“They’re stronger and better skilled in SBA lending,” Ancog said.

Across the state, Huntington Bank was by far the top 7(a) lender in the 2015 fiscal year with 1,304 loans for $200.9 million.

Lansing-based Michigan State University Federal Credit Union was the top credit union SBA lender at 15 loans for $15.2 million, followed by Kellogg Community Credit Union in Battle Creek with 13 loans for $8.0 million.

As 7(a) volumes grew in the last year, activity in the SBA’s other top lending program, known as 504, declined in Michigan, a reflection as well of the state economy, Ancog said.

The SBA wrote 165 loans for $87.0 million in the 2015 fiscal year under the 504 program, which compares to 204 loans for $90.1 million in the prior year.

Mark Davis, president of the Economic Development Foundation in Grand Rapids that coordinates 504 lending, attributes the decline to increased competition among banks for business lending. As a result, more banks today are writing business loans in-house that they previously may have referred to the 504 program.

“A lot of banks are competing for deals and a lot of banks are growing their portfolios, so they are keeping more deals,” Davis said.

Davis notes interest rates for 504 loans, which are primarily used for large capital projects, were about a half-percentage point higher during the 2015 fiscal year, cutting into loan volumes. Rates for 504 loans recently declined to 4.76 percent.

He expects 504 lending will grow in the new fiscal year, especially as he’s begun to hear some bankers talk about becoming a little more risk-conscious and wanting to mitigate their lending risk through an SBA program.

“A lot of people are really watching how long the auto expansion is going to keep going on and think it’s getting a little long in the tooth,” Davis said.

The SBA in the present 2016 fiscal year is also waiving a 0.5 percent upfront fee on 504 loans, which should help to generate volume, he said.

The Economic Development Foundation last year processed 47 loans for $23.5 million.

Read 2608 times Last modified on Monday, 26 October 2015 16:32

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