San Joaquin Valley sees improvements to small business sector

Jessica SarterSmall Business Lending

Different regions in the U.S. have released varying reports regarding the climate of small business lending and growth. As the national economy continues to recover, each state is beginning to see gradual increases in small business loan disbursement and creation of new enterprises.

Businessweek recently reported that areas of California are showing strong signs of small business recovery. Though gradual, this is great news for the Golden State, which was among the hardest hit by the most recent recession. Fueling these gains, the news provider purports, has been extensive support coming from several organizations and government agencies.

According to Businessweek, Fresno County saw more than 850 businesses fall to the recession between 2007 and 2010, which led to a spike in the local unemployment rate. Additionally, U.S. Census Bureau data revealed that smaller firms – those employing 50 or fewer employees – comprised over three-quarters of the closed businesses in that time frame, the source added.

California’s small business track record was cited as being the worst in the nation by CNNMoney in May of 2011. Citing Dun & Bradstreet data, CNN explained that the small business failure rate in the state was almost 70 percent higher than the national average.

Indicators of improvement, however, have popped up in recent months, as the U.S. Small Business Administration has seen a 30 percent increase in the number of business workshop-goers so far this year.

“What we’re noticing is that our attendance has increased,” Carlos Mendoza, SBA regional director of the San Joaquin Valley, told Businessweek. “Our classes are packed. There is a tremendous need out there, and most of our attendees are people who want to start up small businesses.”

California has also seen a drastic change in the types of small businesses taking out loans, as Mendoza explained that 30 percent of SBA lending went to startup businesses in 2008. Now, this group accounts for just over 10 percent of all lending.

This specific statistic could be related to the common trends in small business loan acquisitions present across the nation, with California included. Several financial institutions have reported that the SBA’s 504 loan program has been among their most commonly distributed products this year.

Some have speculated that this is not a sign of economic expansion, as the U.S. Small Business Jobs Act allowed this loan program to be used for refinancing. When the temporary program began in early 2011, the SBA projected 8,000 businesses would take advantage of the special use for these loans, which would represent roughly $7.5 billion in disbursement.

Since the temporary program commences at the end of September 2012, the truth of how the 504 loan product is being used will be pending. Contradicting reports, though, have shown that the commercial real estate sector has rebounded substantially across the nation.

The 504 loan program would be heavily accountable for these increases, as its standard, permanent guidelines cite that it can be used on purchases of land, properties and construction of new buildings.

As reports lag well behind the current climate when it comes to small business lending and health in the sector, it is yet to be determined whether economies, like that of Fresno County, are actually expanding. One good sign is the growing turnout to workshops that teach entrepreneurs the finer points of small business lending and practices, while the decreasing proportion of startups acquiring SBA loans should not cause worry.

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