SBA Loans Down 9% In 2008 | Some local banks abandon market, others refocus
Although overall SBA lending in Massachusetts declined 9 percent to $197 billion in 2008 from $215 billion in 2007, loan amounts, as well as the number of loans, swung wildly between dramatic gains and severe losses.
The No. 1 bank on the WBJ’s list of top SBA lenders (see facing page), TD Bank, posted a 7 percent gain in overall loan value in 2008 compared to 2007 even as the number of loans it wrote declined by 33 percent.
One of the region’s real winners was Fidelity Co-operative Bank of Leominster, which saw its SBA loan amount increase 529 percent from $350,000 in 2007 to $2.2 million in 2008. In 2007, the bank made one SBA loan. Last year, it made 13.
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Michael Hewitt, Fidelity’s COO, executive vice president and chief financial designer, said the increase was the result of a concerted effort to do more SBA lending.
“Seven years ago, we didn’t have any business banking loans at our bank of any kind at all,” he said. More recently, the bank established a small business banking group and has trained branch staff on SBA lending.
As the overall commercial lending market has tightened, “we look at ways to get credit enhancements” for clients, “and one way is through SBA lending.” If a client doesn’t quite have the credit needed to secure a bank loan, a 75 percent or 80 percent SBA loan guarantee can help, Hewitt said. And Fidelity has been growing its business in that area.
“Banks are being more careful, and because of that, you’re looking at more opportunities to put on a credit enhancement,” Hewitt said.
Some SBA lenders have been hurt as the secondary market for SBA loans has dried up.
Others, like Middlesex Savings Bank in Natick, said demand for loans slid in the last nine months of 2008.
“It was down pretty dramatically,” said John Fossett, Middlesex’s senior vice president and director of SBA lending programs. As a result, the bank, like Fidelity, sought out opportunities to use SBA programs and Fossett said Middlesex has nearly 10 prospective SBA loans in its pipeline.
“We’re increasing awareness that we’re in the business...” Fossett said. “We don’t sell SBA loans on the secondary market. We’re interested in keeping the SBA loans for our books, but it doesn’t surprise me that that market has dried up.”
Click here to check out the list of lenders compiled by the WBJ.
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