Shutdown chills SBA’s small business lending

October 10th, 2013

Shutdown chills SBA’s small business lending

In a recent article by the San Francisco Business Times, Mark Calvey touches on the government shutdown and its effect on small business lending.

Shutdown chills SBA’s small business lending

Bankers are trying to put a brave face on the issue, but the government shutdown is taking its toll on making loans backed by the Small Business Administration.

The most pain is arising in the SBA’s 504 loan program, a popular means for small business owners to finance the purchase of the real estate in which their companies operate.

“Business owners who apply for an SBA 504 loan used for real estate purchases or equipment purchases may experience a slowdown in the approval time as these require an SBA credit approval to fund,” Wells Fargo spokesman Ruben Pulido told me Thursday. “Wells Fargo’s ability to accept SBA 7(a) loan applications used for real estate purchases and construction, partner buyouts, equipment purchases and working capital will not be impacted.”

Wells, led by CEO John Stumpf, and its rivals are eager to stress the positive.

“We are still accepting applications for all SBA loan products we offer and will continue to credit approve and process those applications up to the point of needing an SBA authorization,” Pulido said. “We will then follow the U.S. Small Business Administration’s queuing instructions as we await resolution of the federal budget and funding for federal fiscal year 2014 applications.

To put today’s comments in perspective, some SBA lenders were telling me ahead of the government shutdown that they weren’t expecting any impact, or at least that’s the message I heard. As one of my long-time sources, an industry veteran, said upon hearing that, “Ask them their age. They may not have been in the business during the last government shutdown in 1996 so they don’t understand the full ramifications of the federal government shutting down.”

Another source asked me today whether I was having trouble getting people to comment for this story, given the politics involved and the natural reluctance of bankers to admit difficulties in lending. I said yes, some have been reluctant to talk on the record. That why I was pleased that Wells Fargo (NYSE: WFC) and San Francisco-based TMC Financing were so forthcoming.

TMC, which works with borrowers to secure SBA 504 loans, said it has seven loans in the queue totaling $5.17 million that are waiting for SBA approval. TMC said it plans to submit 22 loans totaling $22.4 million this month. And the firm says 31 loans totaling $31.4 million need to close escrow by Halloween.

The numbers mask the stress facing small business owners trying to invest in their operations. “The number of loans in a holding pattern is starting to pile-up,” said Rich Grant, chief operating officer at TMC Financing.

“We are continuing to process loans and prepare loans for SBA approval. We are answering client questions, and are ready to move loans forward as smoothly as possible once the SBA reopens,” said TMC CEO Barbara Morrison. “The biggest concern with a prolonged government shutdown is the uncertainty this causes for our 504 clients and partners. A prolonged shutdown will affect small businesses access to capital, which could have a major impact on small businesses ability to operate, grow and create jobs.”

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>