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North Bay Business Journal

Monday, May 14, 2012, 6:35 am

Sunset of perks bumps SBA demand down — current borrowers more aggressive

SBA official: Businesses that are borrowing ‘are much stronger’

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    NORTH BAY – The volume of small business lending in the North Bay backed by the U.S. Small Business Administration was 29 percent lower for the first half of fiscal 2012 compared to the same period last year, with a corresponding 16.7 percent decrease in dollars across Sonoma, Marin and Napa counties, according to the SBA.

    The lower volumes of this past six months were attributable to the comparative rush in lending that occurred during the same period last year, with borrowers hurrying to take advantage of several favorable SBA provisions in the so-called JOBS Act that ended in 2010, said Mark Quinn, district director for the SBA’s San Francisco office, which oversees the North Bay.

    Yet while the expiration of those provisions has lead to an expected 20 percent lower volume of SBA lending nationally this year, Mr. Quinn said that small businesses receiving loans through the program are using it to finance more aggressive goals than in fiscal 2011.

    “It’s not so much that we have a surge in demand for SBA lending. What we’re hearing from lenders is that the businesses are much stronger and not simply looking for a loan to keep the doors open,” he said.

    More than $38 million went to 70 businesses in Sonoma, Marin and Napa counties through both the 7(a) and 504 programs in the first half of the fiscal year, compared to over $41 million to 99 businesses in the first half of fiscal 2011.

    The largest loan, a $5 million Heritage Bank of Commerce loan to Healdsburg’s Capture Wines LLC, was among four that took advantage of 2010’s permanent increase in loan limits through the SBA, from $2 million to $5 million.

    Sonoma County saw the highest level of loan activity for the first half of the fiscal year, with $22.6 million across 42 loans. Marin County had $4.4 million across 15 loans, and Napa saw $11.3 million for 13 loans.

    Some of that recent activity was attributable to the temporary refinance program currently available through the 504 loan, which makes it easier for businesses to obtain fixed-rate financing for property at a time when pure bank refinancing can be difficult, Mr. Quinn said. Typically used to finance real estate and equipment purchases, approximately 25 percent of the 504 loans are currently going towards refinancing efforts, following changes that made the process easier for lenders in October of last year.

    At Novato-based Circle Bank, lending manager Michael Rice said that a significant portion of the bank’s recent 504 loans have been used for refinancing.

    “The SBA 504 refinance program available through Sept. 27 of 2012 is now allowing many business owners in the North Bay to obtain long term fixed-rate financing on business property types that are challenging to financing conventionally,” said Mr. Rice, a senior vice president at the bank.

    Bay Area Development Co., one of the nonprofit certified development companies authorized to partner with institutions in financing the 504 loan, was among the most active lenders in the North Bay, with eight loans totaling $5.2 million.

    Redwood Credit Union was among the most active SBA lenders in the period, with 10 loans totaling $3.7 million. Exchange Bank made eight loans totaling $2.9 million.

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