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October 25, 2011

The Puget Sound Business Journal reported in September that the area credit unions have asked the SBA for the right to make more SBA guaranteed loans (from 12% to 27% of assets). They claim that a raised loan limit can create up to 150,000 jobs nationally.

Whether it’s credit unions or banks, in a climate of caution, SBA loans have made a huge difference. In a tight regulatory environment it’s allowed banks to make the loans politicians have chided them for not making.

Bankers tell me, and this is not unique to just the banking industry, that there are so few deals out there that every deal is important (I just heard the same thing from an East Coast M&A advisor). When every deal is important, caution abounds and there is extreme trepidation about the future economy, having a loan guarantee for the majority of the loan makes it much easier for the bank to lend.

Perhaps one of the bankers reading this can confirm the following. I read this summer that the SBA loan guarantee program is one of the few government programs that does not run at a deficit. The loan fees that the borrower pays cover the costs of the program (these fees are really an insurance premium to cover the loans that go bad).

Even though SBA does not loan money directly to small business owners, we play an important role for people who want to finance or grow their business. When you apply for a SBA-backed loan at your local bank or credit union, you are asking SBA to provide a guarantee that you will repay your loan as promised. SBA website

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