Small businesses turned to the U.S. Small Business Administration (SBA) for commercial financing in record numbers during fiscal year 2006, setting new single-year records for both the number of loans and the dollars loaned, according to SBA Administrator Steven C. Preston.
“The SBA’s loan programs have continued to set records every year,” Preston said in a prepared statement announcing the 2006 totals. “Before fiscal year 2002, the programs never produced more than 42, 000 loans combined. Since then loan volume has more than doubled.”
During fiscal year 2006, which ended September 30, the SBA backed a net 100,197 loans, totaling $19.1 billion, under its two primary loan programs, the basic SBA 7(a) loans and Certified Development Company or 504 loans. Single-year records were set for both the number and overall amount of loans made. The previous records, set last year, were 94,554 loans, worth $18.1 billion, under the same two loan programs.
“We are very pleased with the small business lending performance this past year and for each of the previous five years,” Preston stated. “These numbers reflect the confidence American entrepreneurs have in the U.S. economy, as well as in the SBA lending program that backs their loans. I am thankful to our lenders and resource partners for their steadfast commitment to small businesses.”
Both primary loan programs set records this year. The 7(a) loan guaranty program – most often used for working capital – produced 90,477 loans, worth $13.46 billion. The Certified Development Company, or 504 program, for use in purchasing real estate and fixed assets, provided 9,720 loans, worth $5.61 billion. Preston noted that borrower fees on the basic SBA 7(a) loans under $150,000 were the same as they were in 1985.
The http://www.sba.gov/financing/sbaloan/cdc504.html Certified Development Company loan program is not as widely recognized as the http://www.sba.gov/financing/sbaloan/7a.html 7(a) program. The loans are available to small businesses wanting to transition from rented space to building ownership or who wish to construct a new space.
“It’s a little known program, but it’s so beneficial to small businesses,” Robert Burke, executive director of Rappahannock Economic Development Corp., told The Free Lance-Star (Fredericksburg, Virginia). “If the public knew about it, the volume would substantially increase.”
In addition, a third of the loans made over the previous 12 months went to minority borrowers. New start-up businesses received 32 percent of the loans made. Women-owned businesses accounted for 22 percent, while businesses in rural areas made up 21 percent of fiscal year 2006 loans. Loans to African Americans, Hispanics, Asian Americans and Native Americans also increased.
Since 1992, the SBA has also partnered with non-profit organizations to offer microloans. The Microloan, a 7(m) loan program, provides short-term loans of up to $35,000 to small businesses and not-for-profit childcare centers needing small scale financing and technical assistance for start-up or expansion. Unlike the two primary loan programs, microloans are not guaranteed by the SBA. They are available through designated intermediary lenders in selected locations in most states across the country.
“SBA is committed to continuing to increase our support for underserved businesses and communities,” Preston explains, adding, “It is clear the changes we have made to improve our lending programs have not only worked, but also have provided the foundation for even higher lending levels in the future.”