Demand for SBA loans up in Larimer, Weld counties

Northern Colorado small business borrowing helped the federal Small Business Administration set a record for lending in 2006, in terms of both dollars and number of loans made.

SBA lenders in Northern Colorado originated 219 small business loans worth $28 million in fiscal year 2006. Larimer County businesses took out 146 SBA loans totaling $16.8 million while Weld County businesses took out 73 loans adding up to $11.8 million.

Colorado Lending Source, headquartered in Denver with a Fort Collins office, provided close to $13.5 million in loans to small businesses in both Weld and Larimer counties in fiscal year 2006, making it the largest provider – dollar-wise – of SBA loans in Northern Colorado as well as in each individual county.

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First National Bank was the second largest provider of SBA loans in Larimer County with 13 loans accounting for $2.078 million followed by Preferred Lending Partners with three loans for $1.955 million and JP Morgan Chase Bank with 31 loans for $1.76 million.

In Weld County, Banco Popular North America, headquartered in Chicago, made one $2 million loan, making it the second largest SBA loan provider, followed by three loans by Wilshire State bank totaling $1.97 million, two loans by Center Bank for $1.776 million and two loans by Preferred Lending Partners for $1.58 million. Both Wilshire State Bank and Center Bank have California roots.

In terms of number of loans, JP Morgan Chase Bank takes the honors with 31 loans in Larimer and 18 in Weld. Other banks with high loan numbers include Wells Fargo Bank with 22 loans in Larimer and 11 in Weld and U.S. Bank with 18 loans in Larimer and eight in Weld County.

Nationally, the SBA backed a net 100,197 loans totaling $19.1 billion during the 12 months ending Sept. 30, 2006, under its two primary small business loan programs – the 7(a) loan guaranty program, most often used for working capital, and the 504 program used for the purchase of real estate and fixed assets.

Record numbers

Both the number of loans and the dollar amount is a single-year record for the agency. Before FY 2002, the programs never produced more than 42,000 loans combined, according to the SBA. Since then, loan volume has more than doubled.

A third of the loans nationwide in FY 2006 went to minority borrowers, 32 percent were to startup businesses, 22 percent to women-owned businesses and 21 percent to rural businesses.

Chris Chavez, regional communications director for the SBA in Colorado, said the state has experienced a significant increase in SBA loans as well. In 2006, SBA approved 2,612 loans in Colorado worth $556 million, compared to 2,225 loans worth $520 million in 2005.

Though the Denver area receives the lion’s share of SBA lending provided by Colorado Lending Source, Northern Colorado is a close second, said China Carll, CLS marketing and legislative affairs officer in Denver. CLS was organized in 1990 as a means to support growth and development of small businesses.

“We have definitely seen an increase in lending in Northern Colorado,” she said.

Being a 504 lender means loans CLS provides are used to build, purchase or expand commercial real estate, including equipment expansion. Typically, these loans are used by businesses to build their own facility after renting for a while, or to expand current holdings.

“We expect the number of loans to increase,” Carll said. “Northern Colorado has a lot of entrepreneurs who have lost their jobs, are just getting their own businesses started and are ready to take the next step.”

Numbers up, amounts down

First National Bank President Mark Driscoll also expects to see increasing numbers of small business loans in the years ahead, although he noted individual loan amounts are decreasing, with most being under $250,000.

“Eighty-five percent of new jobs in the U.S. economy are created by small business. This is the heart and soul of the economy,” he said.

First National Bank, Driscoll added, has always been a “significant” small business banker in Northern Colorado. “By virtue of our market share, we have hundreds of small business customers. We look at every way to help them grow and one of the ways is the SBA,” he explained. “We are committed to making as many SBA loans as we can.”

An SBA loan goes through the same origination process as a conventional loan. But rather than take on 100 percent of the risk of a conventional loan, the bank shares up to 50 percent of the risk with the SBA. SBA loans can extend to 20 years and have low fixed rates. Commercial banks are the largest suppliers of debt capital to small firms, supplying more than 80 percent of lending in the credit line market and, with the exception of leasing, more than 50 percent in other markets.