Small Business Lending on the Increase in W.Va.
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The recent economic downturn made a definite impact on small business lending in West Virginia. Although it doesn’t seem to be as severe in West Virginia as in other parts of the nation, it has caused some constraints and concerns among our lending and small business communities.
At the onset of the economic crisis, lenders were hesitant to provide capital to small businesses, which caused them to tighten their credit criteria. Entrepreneurs were unsure what influence the economic situation would have on their small businesses and were reluctant to seek financial assistance.
As far as SBA-guaranteed lending, during the first quarter of fiscal year 2009, we experienced a marked decrease, down more than 50 percent compared with the same period last fiscal year. This trend was reflected not only in West Virginia, but nationwide.
The enactment of the American Recovery and Reinvestment Act on February 17, 2009, was designed to provide an economic stimulus to small businesses throughout the nation. Since the recovery act’s inception, West Virginia has seen a 44 percent increase in the number of SBA-guaranteed loans and an 82 percent increase in the dollar amount of those loans. Although we are still not back to fiscal year 2008 lending levels, we have experienced a surge in lending and an increased interest among lenders and the small business community which can be attributed to the changes enacted by the act.
One significant recovery act change that small businesses have taken advantage of is the temporary elimination of SBA’s guaranty fee, which can be a maximum of $53,750 on an SBA loan guaranty. This particular enhancement has saved West Virginia’s small businesses $224,790 in guaranty fees through June 23.
A great deal of interest has also been generated by the America’s Recovery Capital, or “ARC” loan. A temporary SBA loan program authorized by the act, ARC is designed to give viable small businesses suffering immediate financial hardship some temporary financial relief so they can keep their doors open and get their cash flow back on track.
The program, which was launched June 15, provides deferred payment loans of up to $35,000, which are to be used for principal and interest payments on existing, qualifying debt or loans. ARC loans are interest-free to the borrower and are 100 percent guaranteed by the SBA. The SBA makes interest payments to the bank.
In fact, a West Virginia bank was one of the first in the nation to process an ARC loan. Main Street Bank in Wheeling submitted an ARC loan request at 9:00
a.m. on Monday, June 15, and received confirmation of approval just minutes later. The loan went to Monica Bremer, owner of Hill Top Enterprises in Wheeling, who was in need of financial assistance to meet obligations after her husband fell ill, and as a result of the economic situation. This was one of several ARC loans successfully processed by Main Street Bank during the week.
Another small business that has taken advantage of the temporary changes made to SBA’s loan programs as a result of ARRA is Bland Fencing, located in Petersburg. The business received a 90 percent SBA-guaranteed loan in the amount of $350,000 through Citizens National Bank in Elkins which “meant everything to the business,” as stated by owners Teresa and Richard Bland. Bland Fencing also saved $9,450 as a result of the elimination of SBA’s guarantee fee.
SBA’s West Virginia District Office is working hard to implement the act’s programs. We have provided extensive training and guidance to our lenders who play an extremely critical role in distribution of the act’s enhancements. Although there are many moving parts, our aim is to implement these programs quickly and effectively to provide West Virginia’s small businesses with the tools they need to succeed.
I welcome entrepreneurs who may have issues or concerns which have evolved as a result of the recent economic situation to contact me directly at (304) 623-5631. We know small businesses have a proven ability to create new jobs and commerce. The next phase of our economic recovery rests in their hands.
Judy McCauley is director of the U.S. Small Business Administration’s West Virginia District Office in Clarksburg. For additional information on SBA, contact the West Virginia District Office at (304) 623-5631, via email at wvinfo@sba.gov or visit the office’s Web site at www.sba.gov/wv.
