The Business Journal’s annual list of lenders in the Small Business Administration program isn’t so much the calm before the storm as it is the storm before the tornado before the hurricane.
The list ranks lenders based on the dollar value of their loans for the six-month period that ended March 31. So, it doesn’t capture volume from the federal government’s new—and now-depleted—$350 billion plan to provide SBA loans to small businesses affected by the coronavirus.
That cash is part of the $2.2 trillion stimulus package—which was only enacted last month, and which opened to new lending in early April. How that plays out over the next three to six months is the tornado and hurricane.
But even through March, activity in a strong, pre-lockdown economy was brisk for ranked lenders, storming higher at more than twice the rate of a year ago.
$171M, 77%
For articles on businesses seeking SBA backing and how OC bankers are handling new loans under the stimulus’ “paycheck protection program,” see pages 1 and 18.
For now, know this: before the crisis began, small business lending life was good.
This year’s list was cut off at $4 million; a list of 38 in 2019 was more than halved by boosting the bottom line, a toughening-up of how to get ranked.
SBA activity by the Sweet 16 jumped 77% to about $171 million; the 38 lenders on last year’s list rose 34% year-over-year.
Average loan size more than doubled to $1.6 million from about $680,000 in the same period a year ago—this from lenders who will advance as little as $5,000 in one loan, up to as much as $30 million.
Two Types
Data comes from the SBA and includes only lending to OC borrowers, regardless of the lender’s headquarters or branches. The group of lenders includes banks, community development institutions and nonprofits.
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.
Thirteen lenders reported growth over last year, including seven that more than doubled the dollar value of their lending. Five new companies made this year’s list.
Banks often look at SBA loans as an important entry into the front door of small companies in growth mode.
On the flipside, companies see it as a steppingstone to the big leagues, as the government backed leverage lets them grow a newer business.
Notables
Half the lenders on this year’s list are banks, but the top spot goes to a community development group.
• CDC Small Business Finance in Irvine reported an 83% increase to more than $23.3 million in loan value, good for the top spot two years running.
• Business Finance Capital of Los Angeles had a 155% jump to $22.9 million and second place on our list. Its number of loans also jumped, from 11 to 18.
• Union Bank almost doubled to $20.5 million in loans, good for No. 3.
The most dramatic increase was a 917% to $10.3 million by Laguna Hills’ Harvest Small Business Finance LLC. It issued four loans, up from one in the same period a year earlier.
City National Bank’s Irvine office snagged the second-biggest jump, 818% to $4.7 million in funding and No. 15.
One year ago, U.S. Bank’s SBA division jumped from No. 19 to No. 2 by providing $11.9 million in loans. On this year’s list, it dropped its funding to $2.9 million and thus didn’t make the list.