NORTH BAY — More capital is flowing to North Bay small businesses through loan programs backed by the U.S. Small Business Administration, with a 10.4 percent increase in dollar volume funded in Sonoma, Marin and Napa counties comparing the first half of the administration’s fiscal year to the same period one year ago, according to data from the SBA.
Lenders approved $42.2 million in both SBA 7(a) and 504 loans, the two most popular loan types through the SBA, in the three counties during the six-month period ended March 31. The number of loans, 83, was up from the 70 loans completed in the same period in fiscal year 2012, according to data from the SBA.
The increase comes as part of a broader trend for SBA lending across the Bay Area, a region where demand for financing has maintained its momentum despite the sunset of several temporary provisions Congress enacted to help jump-start business borrowing, according to the district director for the SBA in the Bay Area, Mark Quinn.
“We set a record level of lending in the San Francisco office in 2012. In 2013, we’re on a similar pace as last year,” Mr. Quinn said.
Sonoma County saw the greatest amount of lending in the North Bay during the period, with $17.9 million in both 7(a) and 504 and a total of 48 loans. That dollar volume was down from $22.6 million during the same six months in the prior fiscal year, but the number of loans completed had increased from 42 in the comparable period.
Lenders completed $13.4 million over 19 loans in Marin County, a significant boost compared to $4.4 million and 15 loans during the same period in fiscal year 2012, according to data from the SBA. There were 16 loans totaling $10.9 million in Napa County, compared to $11.3 million over 13 loans in the prior year.
Solano County saw $5.7 million in lending across 12 SBA loans for the period, with $2.8 million in loans for Mendocino County and $534,400 for Lake County.
Lending the highest dollar volume in the North Bay for the period was Santa Rosa’s First Community Bank, with $6.7 million in SBA 7(a) loans. The bank had five loans in Sonoma County totaling $2.8 million, and one loan in Napa County valued at $3.9 million.
Requests for financing to purchase big-ticket items has driven much of the recent demand, including equipment financing, business acquisition and commercial real estate purchase or refinancing. Demand for working capital has also increased, said Barbara Larson, senior vice president and loan officer for the bank’s North Bay commercial lending, including SBA products.
Also among the most active lenders in the North Bay was Wells Fargo, which funded $2.2 million in the six-month period over nine of the SBA-secured 7(a) loans in Sonoma County and $6.3 million across the broader region.
“We are seeing more small business owners coming in to learn about SBA loan opportunities and apply for commercial real estate loans throughout the North Bay,” said Tracy Sheppard, business development officer for Wells Fargo’s SBA and commercial lending in the North Bay. “Demand is up, especially in Sonoma County. And this is across all industries.”
Mr. Sheppard and others noted that the long-term fixed rates possible through an SBA loan were an attractive option in the current low-interest-rate environment, encouraging some business owners to seek financing to transition from leasing to owning a property and to make other large purchases.
Those conditions have also helped drive SBA financing activity at Exchange Bank, another active SBA lender with $3.4 million across seven loans during the period in Sonoma County, said Sherrill Stockton, a senior vice president and the bank’s head of SBA lending.
The permanent increase in loan size limits to $5 million for both 7(a) and 504 loans has helped fuel larger transactions for SBA lending at Exchange Bank and elsewhere, she said. As borrowers are able to use those SBA-guaranteed products to help meet underwriting standards and finance larger purchases, Ms. Stockton, who was recently appointed to the executive committee of the National Association of Government Guaranteed Lenders, said that the administration is now focusing on ways to make its microloan programs like the so-called “Small Loan Advantage” more user-friendly for lenders.
“The mantra they’re trying to use in everything they’re doing is to allow more of your internal processes,” said Ms. Stockton. “The Small Loan Advantage process was too complex. They tried to make it more in line with banks’ internal processes, and they saw an exponential increase in use.”
The lower capital needs of smaller borrowers have attracted some specialized players to the North Bay in recent months, including Oakland-based small loan specialists Oakland Business Development Corporation. Operating as Bay Area Small Business Finance, the non-bank lender recently received authorization to offer SBA-backed loans up to $250,000 and completed loans in Sonoma and Napa counties during the period, according to SBA data.
Among the provisions no longer in place this year includes a popular temporary program that provided debt refinancing under the 504 loan structure, a loan that involves a portion secured by a certified development company plus a mortgage from a traditional lender. The provision had required as little as 10 percent down and allowed significant extraction of equity, and fueled a major boost in 504 activity last year.
While demand remains for those loans, typically used to provide long-term, fixed rate financing for purchase of tangible assets, lenders specializing in them shared hope that Congress would make the refinancing element permanent in the near future.
“There is bipartisan enthusiasm in Congress to support recently introduced legislation that will bring back the SBA 504 refinance program that expired last September, just as it was gaining momentum,” said Kelly Ryan, Bay Area loan officer for CDC Small Business Finance.
Other active lenders in the region included First Community Bank, with nearly $6.7 million in loans in Sonoma and Napa Counties, Redwood Credit Union, with six loans totaling nearly $1.5 million in Sonoma and Napa, and Bay Area Development Company, a 504 lender with more than $6.3 million in loans across the North Bay.
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