Loans under the Small Business Administration to local borrowers increased by what, at first glance, looks like an impressive 20% to $200 million in the six-month period ended March 31.
As remarkable as that gain sounds, it’s lower than prior years of 63% in 2021, 77% in 2020 and 34% in 2019.
“The big reason numbers are down, is because there were tremendous governmental incentives” in the prior two years, said Mark Hogan, the head local official for the CDC Small Business Finance of Irvine.
An example of a key incentive was a waiver of fees that expired Sept. 30 before this list’s reporting period began. The waiver affected Union Bank, which fell out of the top spot to No. 3 as its lending dropped 36% to $15.4 million and the number of loans issued declined from 16 to seven.
“We had a spike in approvals in September 2021 to allow businesses to take advantage of the fee waivers before they expired,” said Todd Hollander, head of Business and Small Business Banking for Union Bank.
“We have not experienced a slowing in the growth of loans,” Hollander said. “For small businesses who are seeking loans, we’re hearing more concern about the rising rate environment rather than an economic slowdown.”
CDC Small Business Finance, a community development group, itself was able to double its own loan growth to $49.2 million, taking the top position on this week’s Business Journal list of the top local SBA lenders.
Average loan size for the CDC, which focuses on 504 loans for real estate, rose from $756,738 to $1.26 million.
“It was pent up demand that has come through this last six months,” Hogan said. “We have done a better job of being in touch with the borrowers. We’ve been very creative in understanding borrowers, who had a difficult 2020 because of the pandemic. We couldn’t keep up with the demand.”
$1.2M Average
The 15 lenders on this week’s list issued 168 loans, a 14% increase from last year. The average loan size was $1.2 million, similar to year-ago levels.
Seven of the 15 lenders on this year’s list are banks. Other lenders are community development institutions and nonprofits. Data comes from the SBA and includes only lending to OC borrowers, regardless of the lender’s headquarters or branches. Lenders advance anywhere from $5,000 to as much as $30 million.
Nine lenders reported loan growth topping 25%. Four lenders reported a decline.
Eight new companies made this year’s list.
The most prominent increase was Irvine’s Sunwest Bank, which climbed 313% by issuing five loans totaling $5.17 million.
Companies see the SBA loans as a steppingstone to the big leagues, as the government-backed leverage lets them grow a newer business. Banks often look at SBA loans as an important entry into the front door of small companies in growth mode.
The list measures two types of loans: the 7(a) program for business acquisitions, equipment purchases and debt refinance; and 504 loans used for owner-occupied commercial real estate purchases and refinancing, as well as equipment buying. The latter loan lets lenders ask for as little as 10% down, versus the typical 20% to 25% from their conventional banking products.
“There’s more demand now than ever but there’s less product” for 504 loans, Hogan said.
The 504 lending has increased due to the higher purchase price of real estate, Union Bank’s Hollander said.
“The businesses seeking and receiving loans from us have been from a variety of industries with no noticeable concentrations,” Hollander told the Business Journal. “Technology companies that deliver services remotely have fared well, as have manufacturers up until the supply chain issues we’ve experienced recently.”
Notables
• No. 2 Business Finance Capital of Los Angeles reported a 56% loan increase to $36 million. Its loan count rose from 19 to 29.
• Wells Fargo jumped from No. 7 to No. 4 with a 27% increase to $13.1 million. Its loan production grew from 13 to 24.
• Ontario-based AmPac Business Capital, which wasn’t on last year’s list, ranked No. 5 with a 157% increase in loans to $11.9 million. That was mostly because its average size loan jumped from $465,000 to $1.09 million.
• The biggest decliner was Wilmington, N.C.-based Live Oak Bank, which reported lending fell 63% to $8.3 million while the number of loans dropped from 15 to four.
n Another big decliner was Laguna Hills-based Harvest Small Business Finance LLC, which fell 61% to $7.2 million and dropped from No. 6 to No. 10.
