Arizona SBA loans decline in slowing economy

General tightening of credit standards among lenders, problems in the secondary loan market and lender financial difficulties have caused a substantial decline in SBA loan totals in the first quarter of Fiscal Year 2009. A total of 211 loans valued at $83 million were made in the quarter. In the same quarter of FY2008, 549 loans were made, totaling $237 million. This annual comparison shows a 62 percent decline in the overall number of loans and 65 percent in total dollars lent.
     "The slowing economy, stricter credit standards and the continuing aversion to risk among commercial lenders have increasingly made access to capital for Arizona small business owners a serious challenge," according to SBA's Arizona District Director Robert J. Blaney.
     "These factors continue to foster the climate of caution among lenders and borrowers alike and are driving the decline in SBA loans to small businesses in 2009."
     Blaney adds that "despite these conditions, money is still available for qualifying small businesses, rates for SBA loans remain low, and SBA has not tightened its credit criteria."
     According to SBA, small business borrowers continue to report a significant negative shift in their desire to take on new debt in this economic environment, preferring to wait for better economic times.
     An additional dynamic is the devaluation of collateral available to back business loans. Small business borrowers typically use their primary residences for loan collateral, but as property values drop, many small business owners find that they no longer qualify for loans available to them in the past. The convergence of these conditions conspires to drive down both the appetite for and availability of small business loans.
     The quarter-end totals reflect these current market conditions. The total dollars lent under SBA's 7(a) loan program, designed to assist small businesses with start up, growth and working capital needs, dropped 43 percent to $58.7 million.
     Total funds lent under SBA's 504-loan program, designed to help businesses purchase major assets such as real estate or renovation, fell 82 percent to $24 million. The greatest decline by product was seen in SBAExpress.
     The impact of SBA loans on Arizona's economy remains significant. Measured by the number of jobs either created or maintained by loan funds cycling through the state economy, first quarter job growth or retention totaled 4,518.
     However, reflecting economic conditions, this total represents less than half that reported for the same period of 2008. Among SBA lenders, the Business Development Finance Corporation earned the top spot for 504 loans with eight projects totaling approximately $11.2 million.
     CDC Small Business Finance followed with seven projects totaling $4.2 million and Southwest Business Finance Corporation was third with four projects totaling $5.5 million.
     Arizona's top 7(a) lenders for the quarter based on loan activity were Wells Fargo Bank, Compass Bank and JP Morgan Chase Bank. Combined, the three lenders made 83 loans totaling nearly $26 million.

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Arizona SBA loans decline in slowing economy