small business loans

$410 Million in Small Business Loans Given Out in Missouri

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Clint ZweifelMissouri, or at least its State Treasurer Clint Zweifel, is very generous with its small business owners as Zweifel stated that he awarded 1,400 low-interest loans to farmers and small businesses last year with the total amount of the loans equaling $410 million, a new record to say the least.

This number is up 40% from the $356 million in loans given out last year. 2010 was the first to set a record in loans since $356 million was given out back in 1992. The loans are made available through the Missouri Linked Deposit program. Farmers and small business owners from around Missouri saved an estimated $7.2 million in interest (nearly 30% on the cost of the loan) according to Zweifel.

In 2011 the St. Louis region, which encompasses St. Louis City and the counties of Crawford, Franklin, Jefferson, Lincoln, St. Charles, St. Louis, Warren and Washington, received over $99 million from 150 low-interest loans for farmers and small business owners according to a statement from Missouri State Treasurer’s Office spokesman John Galloway.

Nearly 130 loan providers with 350 different branches throughout the state offer loans through the program. Times are tough and it is definitely reassuring to see that so many people can get the help they need from their elected officials when they need it. If only the White House would take note.

Source: St. Louis Business Journal – Missouri awards $410 million in small-business loans

The Small Business Administration Sets a New Record for Loans

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ApprovedIn recent SMB news, the Small Business Administration set a new record in the last fiscal year for its government-guaranteed loan programs. The Small Business Administration approved $30.5 billion in loans for the 2011 fiscal year which officially ended on September 30. That is a dramatic increase from the 2010 fiscal year numbers of $22.6 billion and the previous record of $28.5 billion recorded in 2007.

Over $12 billion in Small Business Administration loans were approved in the first quarter alone with borrowers and lenders taking advantage of breaks, or higher loan guarantees and reduced fees, that expired on January 1, 2011. However, the number of Small Business Administration loans only slightly increased from 60,711 in 2010 to 61,689 in 2011.

One reason for this is that Congress has increased the maximum size of 7(a) loans from $2 million to $5 million. This increase, along with a reduction in the number of 7(a) loans under $150,000, resulted in an increase in the average size of a 7(a) loan from $237,996 in 2010 to $365,508 in 2011.

This new trend towards bigger loans is, however, very good news due to the fact that it shows that successful small businesses are using Small Business Administration loans to expand and hire more people. In addition to that, bigger loans also tend to have lower default rates as opposed to smaller loans.

On the downside, businesses that need smaller loans may not be getting the help they need from the Small Business Administration. Agency Administrator Karen Mills stated that the Small Business Administration is addressing this problem by providing incentives to lenders in order to make smaller loans and allow community development organizations to make 7(a) loans to businesses in low-income areas.

The number of 7(a) loans that went to startups increased from 14,472 in 2010 to 15,561 in 2011 though the percentage of loan dollars that went to startups decreased from 25% to 23%. Even though lending to minorities did increase in 2011, lending to businesses owned by women declined from 18% of total loans in 2010 to 17% in 2011.

In addition to that, the $30.5 billion total does come with a few asterisks. The Small Business Administration did not actually make that volume in loans and couldn’t by law. That number represents the gross total not counting the $2 billion in canceled loans. Plus, the Small Business Administration’s 504 program, which is primarily used for real estate, usually includes two loans, one backed by the Small Business Administration and the other a conventional loan.

The Small Business Administration counted conventional loans in its 504 total of $10.3 million because those loans were also paired with Small Business Administration-backed loans. Despite that, the Small Business Administration still had a record year no matter which way you look at it.

Source: Portfolio.com – SBA Sets Loan Record

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Small Business Loans Announced by SBA for Michigan

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SBA logoSmall businesses located in Michigan will be among the first ones in the entire country eligible to have access to a new public-private loan program that is directed at encouraging investment in clean  energy or economically distressed areas, according to a statement from officials.

U.S. Small Business Administration head Karen Mills, along with Governor of Michigan Rick Snyder, Dow Chemical Co. Chief Andrew Liveris and others, announced the $130 million impact investment program. These private and public funds will be available over five years and will be a part of a broader effort to make $1 billion available across the nation.

The initiative will work with private institutional investors in order to help identify and provide money to private equity fund managers who invest in the targeted companies. Dow is chipping in $15 million with state retirement and Natural Resources Trust finds investing $35 million. The remaining $80 million will come from the SBA with absolutely no cost to taxpayers.

Liveris stated that the Start-Up America initiative is a way to make sure the customers of Dow as well as Dow’s suppliers have access to capital in order for them to grow. It is also a great investment for the company. “We’re starting something in Michigan that’s a national initiative,” Liveris said. “We’re actually going to get good returns on this.”

However, the program is not aimed at start-up companies that need venture capital but rather at already established businesses that are having trouble getting loans to expand or do more research and development, according to Head of Credit Suisse’s Customized Fund Investment Group.

This money will only be distributed to companies that are headquartered, have a signified presence in and/or plan to expand or relocate in Michigan. The loans do have to be repaid with an additional 4% interest and some additional fees. Each eligible company will have the opportunity to receive anywhere from $5 million to $15 million.

According to Mills, “Many of the high-growth firms in Michigan simply need more capital to grow, scale up and hire. Through this new public-private partnership . . . we will leverage even more money into Michigan small businesses.” Mills went on to say that many states are under consideration for participation in the loan program, though a decision has not been made on which state will be next.

Governor Rick Snyder (R-MI) is welcoming the chance for Michigan to be the first state to participate in the program launched as a part of Obama’s initiative to spur high-growth entrepreneurship and create more jobs. Though it seems hard to create more jobs when the Obama Administration is shutting down 800 data centers nationwide at the expense of tens of thousands of jobs.

“With all the engineers and the R&D that happens in Michigan, we have a lot of growing companies, and access to capital is a key ingredient in growing them,” stated Andy Dillon, Michigan’s State Treasurer. “We have a chance to reassert ourselves as the entrepreneurial leaders in the country.”

Source: Bloomberg Businessweek – SBA, others announce Michigan small business loans


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Have the Big Banks Followed Through with Their Promises?

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small business lendingMany big banks claimed that they would increase credit to small businesses in 2010, but have they really done this so far? Are they really lending more money to small businesses or have they fallen through? Well, it’s a little difficult to tell due to the fact that “small business lending” for most banks usually covers a variety of different things ranging from real estate to credit cards, and there are very few lenders that separate their numbers for small businesses. Big banks were under pressure from the White House last year to increase credit. Some of the nation’s largest lenders, including Wells Fargo, Bank of America, and JPMorgan Chase, made some very big promises about increasing their lending to small business lenders in 2010. Four of the companies that set some concrete goals were asked how they were doing so far with their lending, and here is what they said.

Wells Fargo
According to Wells Fargo spokeswoman Sarah Toffoli, the company gave more than $2.9 billion in new loans to small business owners in the first quarter. The bank said that their goal for 2010 was to lend $16 billion, which is about $3 billion more than they lent in 2009, to companies with less than $20 million in revenue. “Based on the seasonality of business lending and the anticipation of an improved economy, we hope to meet our commitment by the end of 2010,” said Toffoli. John Stumpf, the chairman of Wells Fargo, says that the company plans to increase the new small business lending of $16 billion in the company’s annual report.

JPMorgan Chase
JPMorgan Chase reported in their first quarter earnings release that so far this year they have lent small businesses over $2.1 billion in new loans. They had said that their goal was to give out $10 billion in new credit to companies with revenues under $20 million. Their goal, which was announced November 9th, 2009, is an increase of $4 billion over last year. Spokesman Tom Kelly said that the bank’s first quarter lending to small businesses has increased 31% over the lending from the first quarter of the previous year.

Kelly also said that since November 9th, JPMorgan Chase has hired 235 new small business bankers, and they plan to hire 325 new employees by the end of 2010. Another interesting fact to note is that Chase has lent more than $110 million in “second-look loans” this quarter. Second-look loans are small business loans that are given to borrowers who were initially rejected but asked for Chase to review their loan application again.

Bank of America
In their first quarter Bank of America has loaned $19.4 billion to small and mid-size businesses, those who have less than $50 million in revenue. When taking out the loans to mid-size businesses, the bank has loaned $3.4 billion to small companies, those with less than $20 million in revenue, during their first quarter.

At a meeting with President Obama on December 14th, 2009, the then CEO of Bank of America Kenneth Lewis stated that the bank planned to increase their lending to small and mid-size businesses in 2010 by $5 billion. As of right now the bank has not released how much money they lent to small and mid-size businesses in 2009, so there is really no way to set a number on how much they will be lending in 2010 or on how much progress they have made this quarter towards meeting their goal for 2010. Spokesman Jefferson George said that the bank is currently running those numbers, and they hope that they will be able to make those numbers available soon.

Huntington National Bank
Huntington National Bank is a regional bank for the Midwest that is currently based out of Columbus, Ohio. In February they set a goal to increase their lending to small businesses, businesses with less than $15 million in revenue, by $400 million. Right now the bank says that numbers documenting progress towards their goal of lending $1.2 billion in 2010 are not available. Their spokeswoman LuJean Smith did say though that Huntington has currently hired more than fifty percent of the 150 new employees that they plan on hiring.

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