Small business lending rebounds, but for how long?

Jessica SarterSmall Business Lending

The U.S. economy has shown signs of life in recent months, as consumer spending and the commercial real estate market continue to rebound from the Great Recession. This has boded well for the nation’s small businesses, as improvements in bank lending and consumer spending, coupled with historic lows for loan rates, have boosted the sector.

However, there have been conflicting reports regarding the U.S. Small Business Administration’s loan disbursement volumes, as well as conventional lending health. Many locales have experienced marked improvements in these important economic indicators, while on the national level, the question of whether this trend will continue remains.

SBA’s fiscal year comes to a close
The Washington Post recently reported that the SBA’s loan disbursement volumes contracted slightly during the fiscal year 2012, which concluded September 30, compared to last year. The federal agency did back roughly $30.25 billion in small business loans, which is the second highest volume of all time, though last year it had supported $30.5 billion.

According to the news provider, just under half of all the loans disbursed were through the General Business Loan program, which accounted for more than 44,000 deals and a total of $15 billion. The Post cited the confidence of SBA administrator Karen Mills in the economic conditions going forward.

“Reaching such strong numbers is a clear sign that both the business and lending communities are regaining their confidence in the economic climate of the country,” she said in a statement, according to The Washington Post. “It means that the credit markets are increasingly willing to help small businesses establish themselves, grow and create new jobs for Americans.”

Several locales experience marked gains
In Miami, the SBA’s loan disbursement volumes jumped 38 percent this past fiscal year, to $59 million, according to Miami Today. This, the source explained, instilled faith in the city’s small businesses, as high small business loan disbursement volumes often lead to stronger economic performances down the road.

In Mesa County, Colorado, SBA-backed loans also increased by nearly 20 percent in fiscal year 2012, according to NBC 11 News. The news provider explained that the big hope from this increase is that businesses are feeling confident enough to take out more loans, which could mean the coming fiscal year will be even more successful than last.

However, some analysts remain concerned that this is not sustainable growth in the lending sector, specifically with SBA loans, because of a caveat with one of the administration’s loan programs.

504 loan special purpose might have inflated numbers
For just under half of fiscal year 2012, the SBA allowed small business owners to use 504 loans to refinance their existing debts. The SBA noted in its announcement this month that the 504 loan program accounted for more than $15 billion of the overall total it backed. Not only has this special use expired, though loans used for this purpose would not be considered new lending, but rather refinancing of older debts.

This means the portrait of business confidence might be slightly skewed, though the definitive answers will not be reached until this time next year.

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