SYRACUSE - Early in the 2005 fiscal year, new loan guarantees are flying fast and furiously out of the Syracuse district office of the U.S. Small Business Administration (SBA).
The total number of loans approved by the Syracuse district in October was nearly 70 percent greater than the all-time, monthly high volume in October of last year. The trend continued in November, too. Through Nov. 22, the district helped local banks award a total of 236 loans to small businesses, up dramatically from 119 in 2004.
Of the 236 loans guaranteed by SBA's Syracuse district office, 221 were part of the flagship 7(a) loan-guarantee program, which provides up to $2 million to small businesses seeking money to expand or start businesses. The 7(a) program is a popular source of longterm loans for small businesses which can't obtain conventional, bank financing on favorable terms. The remainder were "504" loans that Usually go to much larger companies for brick-and-mortar construction work. The Syracuse district covers 34 upstate New York counties. The SBA approved 29 loans in Onondaga County alone through Nov. 22.
District Director Bernard J. Paprocki says there are various reasons for the increased demand for loans in the new fiscal year. One is that small businesses are filling the gaps for goods and services in the marketplace that are left in the wake of larger businesses downsizing
or closing. The Syracuse district has seen its greatest demand for 7(a) loans from small, home-based businesses.
"A number of home-based businesses only need computers and working capital," said Paprocki.
Recognizing this trend, local banks are now tapping more strongly into what Paprocki calls a "growth market." Charter One Bank, for example, has taken a "180-degree turn in philosophy," since its acquisition by Citizens Bark Paprocki said. Although Citizens Bank was second in the nation behind Bank of America in granting smallbusiness loans through SBA last year, Charter One rarely entered the small-business loan field. Charter One is now following the lead set by Citizens.
"Banks are recognizing that there's a huge marketplace for lending amounts below $50,000, and more [home-based businesses] are getting financing," Paprocki explained. "Banks are lending to truly small businesses."
And the final-reason for the SBA's increase in loan approvals? The old familiar cliche -"It's the economy, stupid."
"You might hear about plant closings, but the bigger picture isn't being accurately reported by the media," Paprocki said. "Small business is growing and expanding, producing a record level of job creation. That wouldn't happen if the economy was going downhill."
He also credits the SBA with doing a better job of marketing its loanguarantee program to small businesses, thus stimulating greater demand.
The growth has also come despite the fact that fees for borrowers and lenders in the 7(a) loan program were increased on Oct. 1, in some cases by as much as 100 percent. Then in late November Congress passed a bill, eliminating $79 million in subsidies for the 7(a) program. The measure means the higher fees that went into effect in October will remain in place.
Copyright Central New York Business Journal Dec 10, 2004
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