Keep up the small business loans
Through the first eight-plus months of 2016, the U.S. Small Business Administration has made $56.1 million in loans to Central Massachusetts businesses.
This is significant for two reasons: that amount is already 33 percent above the total loaned in all of 2015, and it means Central Massachusetts is playing a significant role in the rise in SBA loans throughout the state, which surpassed pre-recession levels for the first time.
In her cover story on this issue, Staff Writer Laura Finaldi dives into why banks are doing so much more SBA lending in the region, and the reason is fairly straightforward: there is a pent up demand from customers, and there is money to be made through SBA lending programs.
Local banking institutions have found that by offering SBA loans as part of their suite of products for companies – instead of a siloed-off product where only one or two loan officers have training – they are able to use the SBA guarantees to financially support more small business loans. This not only benefits the bank, but the SBA loan structure can allow small companies to have more cash on hand to make the necessary upgrades and investment in personnel and products that can make firms successful for years.
This spike in lending is due in no small part to the SBA relaxing fees – especially for loans of $150,000 or less – and putting an emphasis on underserved populations, like businesses owned by minorities, veterans and women. Banks in the region have jumped at these opportunities, and it is paying off with more and more lending to companies who meet those profiles. Since 2014, loan amounts to minority-owned businesses have increased 80 percent.
Clearly the SBA was on the right path in making these structural changes, and banks are following through by expanding their SBA portfolios and services. For small businesses – which employ about half of the state's 1.4 million workforce – bank loans are often not easy to qualify for, and having the SBA products available to them is an important cog in keeping the Central Massachusetts economy churning.
In Finaldi's article, the regional director of the Massachusetts Small Business Development Center Network at Clark University – John Rainey – said it is typically poor economic times that breed more small business creation. Strong economic times tend to have more existing businesses looking to expand or be acquired by potential suitors. At this stage of a long period of sluggish but year-over-year growth, it's nice to see a mix of funding for both new business creation and expansion.
So, even though this new level of lending might be the result of pent-up demand from the Great Recession when businesses were reluctant to invest in new ideas, the message the SBA and the banks are sending is clear. There is confidence in the region, the economy and those investing in its growth. That is a surefire way of extending the economic growth we've seen the last seven years. The more Central Massachusetts firms who take the plunge and finance new investment and growth, the stronger our economy will be.
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