PhillyInc: SBA loan guarantees set a record; hooray?

I'm not sure whether it's a good thing or bad that the U.S. Small Business Administration set a record for its lending programs in the federal fiscal year ended Sept. 30.

Small firms obtained 61,689 loans for a total $30.5 billion - up from 60,771 loans and $22.6 billion the previous year.

It's good that so many small businesses were able to tap new credit. But keep in mind that turning to the SBA programs generally means those businesses weren't creditworthy enough to obtain conventional bank loans.

The SBA doesn't make loans directly, but guarantees loans made by approved banks and other lenders. Last week, the commercial banking business of JPMorgan Chase & Co. crowed that it made more SBA loans nationally than any other lender. It made 5,363 loans for a total of $1.11 billion.

However, Wells Fargo & Co. had higher dollar volume of SBA loans - $1.21 billion for 3,135 loans.

The SBA's Philadelphia District also cranked out the loan approvals last year, signing off on 1,356 loans for a total of $549.92 million. That's up from 1,199 loans for $369.90 million in the 12 months ended Sept. 30, 2010.

Different lenders top the local rankings. With 207 SBA loans, M&T Bank Corp. made 100 more loans than its closest rival, Citizens Bank of Pennsylvania. The total amount of M&T loans was $27.91 million, for an average loan size of about $135,000.

The lender with highest local dollar volume was Parke Bancorp Inc.'s 44 Business Capital L.L.C. subsidiary. It made 35 loans for a total of $39.20 million, exceeding the $35.79 million that the much bigger Susquehanna Bank approved for 62 loans.

Based in Washington Township, Gloucester County, Parke Bancorp partnered with several veteran SBA lenders in August 2009 to form 44 Business Capital, which is 51 percent owned by the bank.

Greg Poehlmann, president of Blue Bell-based 44 Business Capital, said the loans they've made over the last two years tend to be bigger than those of other SBA lenders. In all, those loans helped create or preserve a total of 1,200 jobs, said Poehlmann, citing data from the customers' loan applications.

Businesses funded by those SBA loans made by 44 Business Capital are a diverse lot: a hardware-store owner opening a second location in Phoenixville, a concrete manufacturer in Pottstown in need of refinancing, and a motel owner seeking capital to improve a property in Wildwood.

They sound like the types of businesses that banks ordinarily would fund. But then, as we're constantly reminded, these aren't normal times.

"SBA lending expands in times of crisis," Poehlmann said.

The clients of 44 Business Credit generally can't get conventional bank loans because they're either missing or short on collateral; have lower cash-flow coverage than banks like to see; or they're in an industry that's out of favor.

There are indications from data analyzed by the Federal Reserve Bank of San Francisco that the business lending environment has stabilized over the last year. So perhaps we're getting closer to banking as usual.

What's crystal-clear is that the SBA won't break a lending record in the current federal fiscal year because all of the special incentives contained in the Small Business Jobs Act that helped juice the 2011 numbers have expired.

Earnings

Monday: Auxilium Pharmaceuticals, FMC, Harleysville Group, Triumph Group; Tuesday: AmerisourceBergen, Checkpoint Systems, Chemtura, Entercom Communications, Kenexa, PHH, Public Service Enterprise Group, Radian Group, Tenet Healthcare, Tengion, Vishay Intertechnology, Vishay Precision Group, West Pharmaceutical Services; Wednesday: American Water Works, Aqua America, Comcast, Hersha Hospitality Trust, inTest, Lincoln National, NutriSystem, Orasure Technologies, Penn Virginia, Resource Capital; Thursday: Hill International, ICG Group, J&J Snack Foods, Lannett, PPL, Sunoco, TE Connectivity; Friday: Central European Distribution, Marlin Business Services.

 


Contact Mike Armstrong

at 215-854-2980 or marmstrong@phillynews.com, or @PhillyInc on Twitter. Read his blog, "PhillyInc," at www.phillyinc.biz.