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From the El Paso Times
SBA boost: Money makes loans attractive to both lenders, business owners By Vic Kolenc / El Paso Times
Posted: 01/10/2010 12:00:00 AM MST
EL PASO -- The nation's financial meltdown in late 2008 has made it more difficult for small businesses to get loans, but millions of dollars in federal stimulus money has given small-business loans a boost in El Paso in recent months, some in the lending community said.
The dollar volume for Small Business Administration-backed loans grew in El Paso last year in large part due to $375 million in stimulus money available nationwide to enhance lending features of SBA-backed loans, and has helped keep loan activity strong in the past several months, said Phillip Silva, director of the SBA's El Paso district office.
The $375 million was exhausted in late November, but Congress recently injected an additional $125 million of stimulus money nationwide to support SBA-backed loans through Feb. 28.
The money is being used to pay loan fees normally paid by borrowers; that keeps more money in small-business operators' hands and makes the loans more attractive to them. It also is being used to increase the SBA's loan guarantees to lenders to 90 percent from the normal guarantees of 75 to 80 percent. That's aimed at encouraging lenders to make more loans.
"We would have made fewer loans (last year), if not for this (stimulus) program," said Burt Blacksher, executive vice president and chief credit officer for El Paso-based Bank of the West. Some loans may be an "acceptable risk" with a 90 percent loan guarantee, and may not be acceptable with a 75 percent guarantee, he said.
But the main reason Bank of the West's commercial loan volume, including SBA-backed loans, grew $59 million last year compared with 2008 was that it picked up business that large national banks were no longer doing, Blacksher said.
For example, Chase Bank and Bank of America made no SBA-backed loans in El Paso in the federal fiscal year 2009, SBA data show. Wells Fargo made eight SBA-backed loans.
SBA-backed loans are only a small portion of Bank of the West's and other El Paso lenders' commercial loan portfolios. But they are a gauge on how access to capital is going for small businesses.
El Paso lenders provided $41.1 million worth of SBA-backed loans in the federal government's 2009 fiscal year, which ran from Oct. 1, 2008, through Sept. 30, 2009. That's an increase of 4.1 percent from fiscal year 2008's $39.5 million, according to data from the SBA's district office in El Paso.
However, the number of loans decreased substantially -- from 310 loans in fiscal year 2008 to 188 loans in fiscal year 2009.
The combination of a lower loan count with a larger dollar amount is probably due to larger loans being made to existing businesses for expansion, and fewer small loans being made for riskier startups, Silva said.
The reverse happened in recent months. In October through December 2009, lenders provided 49 SBA-backed loans for $7.5 million, compared with 39 loans for $9.3 million in October-December 2008. That may indicate lenders are again providing money to new businesses as the economy improves, Silva said.
Mamie Salazar-Harper, owner of M Rentals, an El Paso company that provides temporary corporate lodging and rents washers and dryers for military housing, said saving about $52,000 in loan fees was too good a deal for her to pass up on a $1.8 million loan. That's why she's now trying to get the SBA-backed loan from her bank to pay for equipment and other expenses to go after larger contracts so her business can expand.
"I want to harvest that opportunity even as some businesses are barely hanging on," Salazar-Harper said.
The $52,000 in fee savings can be used to upgrade computer systems in her business, she said.
Rosalinda and Jose Saenz didn't save as much in fees when they got an SBA-backed $182,500 real estate loan last year from Bank of the West and Accion Texas. But the loan kept their Sweet Life Bakery in Northeast El Paso alive. The $1,800 in waived loan fees was also important, Rosalinda Saenz said.
"We gave everything we had," and we had to borrow from family members to pay the $18,250 down payment, so paying another $1,800 in fees would have been difficult, Saenz said.
The loan helped the couple buy a building at 4500 Dyer to move the bakery, which they've owned for 15 years. They could no longer rent the building where the bakery was situated for 25 years. The bakery was closed for eight months during the transition.
"Without a loan, it would have been difficult to stay in business," Saenz said. "Business has been good" since the bakery reopened in October, she said. "All our customers are back, plus we're getting new customers because now we're on a main street."
Edgar Garcia, owner of Bella Vista Custom Homes, said an SBA-backed, $1.5 million line of credit his company received from Bank of the West last summer helped him build 12 homes last year, compared with only two in 2008. Stimulus money paid his SBA fee of about $45,000 for the line of credit. Those savings freed up more money for Garcia to use for expenses, including increasing his payroll by three people, he said.
"It's hard to pre-sell homes if you don't have a model to show. It's impossible to get a loan for a spec home" in the current tight credit market, Garcia said.
Blacksher, at Bank of the West, said the bank last year began providing lines of credit to small El Paso homebuilders hurt by the nation's mortgage crisis. The stimulus money is helping the SBA provide 90 percent guarantees on homebuilders' lines of credit, and the bank is more willing to risk $100,000 instead of $1 million, he said.
Les Parker, president and CEO of United Bank of El Paso del Norte, said the increased SBA loan guarantee doesn't "cause us to make loans we otherwise wouldn't make." But waiving fees on SBA-backed loans with the stimulus money "has caused us to recommend SBA loans a little more often. ... It's a better deal for the small-business person," he said.
However, United Bank, which Parker said has led El Paso for five consecutive years with the largest number of SBA-backed loans, had a decrease in its SBA loan numbers last year. That's largely due to the fact the recession had a "lot of businesses pulling in their horns," not borrowing and spending less money, he said.
Vic Kolenc may be reached at vkolenc@elpasotimes.com; 546-6421
Top lenders Financial institutions ranked by number of SBA-backed loans provided in El Paso from Oct. 1, 2008, to Sept. 30, 2009:
1. United Bank of El Paso del Norte: 57 loans for $6.1 million.
2. Bank of the West: 39 loans for $11.3 million.
3. Innovative Bank, of Oakland, Calif.: 16 for $380,000.
4. GECU: 14 for $904,500.
5. Superior Financial, of Walnut Creek, Calif.: 12 for $107,500 .
6. Wells Fargo Bank: 8 for $2.3 million .
7. Borrego Springs Bank, of Borrego Springs, Calif.: 7 for $225,000.
8. BBVA Compass Bank: 5 for $1.1 million.
9. North Texas Community Development Corp., of Dallas: 4 for $2.4 million.
10. San Antonio Community Development Corp.: 4 for $1.8 million.
Source: SBA El Paso district office
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