Increase in Number of SBA Loans, but Decrease In Their Size, a Deliberate Part of SBA Strategy

WASHINGTON – Before you look at the dollar volume of SBA 7(a) loans and decide there’s been a fall off in the agency’s program, look at the total number of 7(a) loans it’s approved. That, says one SBA official, is a better indication of the SBA’s strategy for its 7(a) program and the status. In the SBA’s fiscal year 2003 (Oct. 1, 2002-Sept, 30, 2003) it approved a total 67,306 7(a) loans worth $11,267,689,331. Of those: 8,707 were Lowdoc; 33,207 were SBAExpress; 2,572, Community Express; 14,300 were to women; 13,112 were rural; 18,675 were to minorities including 3,623 to African Americans, 5,589 to Hispanics, 744 to Native Americans, and 8,719 to Asian Americans. In FY’02, it made more than 15,000 fewer loans, but their total dollar volume was greater – $12,208,027,000. So far for FY’04, through Nov. 7, 2003, the SBA has made 7,991 7(a) loans worth $1,261,017,000. “It’s not that the SBA is discouraging large loans, but rather that making small loans is easier,” said Mike Stamler, the SBA’s press office director, who added that “the SBA responds to all applicants.” In fiscal year 2003, the average size 7(a) loan the SBA made was $167,000. In fiscal year 2002, the average was $236,000. “Making smaller 7(a) loans is part of our deliberate strategy, but not to the exclusion of larger loans. The SBA hasn’t made it harder to get larger 7(a) loans,” Stamler explained. The maximum a 7(a) loan can be approved for is $2 million, and Stamler noted that “there aren’t many that hit that ceiling.” In fiscal year 2003, only 1,699 loans – 2.5% of the total – 7(a) loans were make for more than $1 million. The greatest number of 7(a) loans – 18,104 – were for less than $25,000. Their total dollar volume was $251,040,069. The next largest segment of loans – 13,656 – was for $25,001-$50,000, with a total dollar volume of $567,459,836. Another reason why the number of lower valued 7(a) loans have increased faster than the higher valued loans, explained Stamler, is the SBA has developed incentives to encourage the smaller loans. For example, the agency’s SBAExpress program, which has a maximum loan amount of $250,000, simplifies the processing of small loans by allowing Preferred Lenders to put the SBA guaranty on the loan without having to actually send the loan application to the agency. The Preferred Lenders accept 50% of the guarantee. Normally, he said, it could take anywhere from one day to a few weeks for the SBA to make a determination on a loan application, depending on how complicated the loan is or whether additional information is needed. But the turnaround time is greatly reduced with the SBA Express program. In 2000, 21% of the 7(a) loans were SBAExpress. In 2002, that figure was up to 34%, and in 2003, SBAExpress accounted for 49% of all 7(a) loans. Stamler recalled a study that was done that showed that small loans create more jobs per dollar than larger loans. “So the SBA’s focus is to make more loans that create more jobs,” he said, adding that, “The SBA’s current strategy is working, and we have no plans to change that.” -