The volume of small business lending backed by the U.S. Small Business Administration in the Bay Area reached an all-time high during the last fiscal year, and volume for such loans in three North Bay counties grew by more than one-third.
Bay Area lending through the SBA's main programs, 504 and 7(a), totaled $1.2 billion, defying expectations that the sunset of temporary perks would cause levels to dip, compared with fiscal year 2011.
That trend extended to the North Bay. Combined financing dollar volume for small businesses in Sonoma, Marin and Napa counties increased 36.6 percent to more than $108.3 million in the fiscal year that ended Sept. 30. Comparable data wasn't immediately available for Solano, Mendocino and Lake counties.
In Sonoma County, 102 loans totaling $68 million went to small businesses through the 7(a) and 504 programs; in Marin, 43 loans for $12.3 million; in Napa, 32 loans for $28 million; in Solano, 36 loans for $25.4 million; in Mendocino, 10 loans for $4.7 million; and in Lake, six loans for $1.4 million.
"We're the only district office that set a record in California," said Mark Quinn, district director for the SBA's San Francisco office, which oversees the North Bay. "I was surprised. In the rest of the country, volumes dropped off slightly."
Nationally, it was the second-largest dollar volume ever for loans backed by the SBA, with $30.25 billion in loans funded during the fiscal year. The all-time record, $30.5 billion in fiscal 2011, was due in part to temporary incentives that allowed the agency to guarantee up to 90 percent of a 7(a) loan's value to a lender in event of a default.Surge in 504 loans
The near-record volume for fiscal 2012 was driven in part by a surge in demand for loans through the SBA's 504 program. Those loans, which include a portion secured by a certified development company plus a mortgage from a traditional lender, are typically used to provide long-term, fixed-rate financing for the purchase of large tangible assets.
Until the end of the fiscal year, the same structure was also available for refinancing existing loans, requiring as little as 10 percent down and allowing significant extraction of remaining equity for reinvestment into business operations.
The popularity of those provisions helped to launch Walnut Creek-based Bay Area Development Co. to the most active SBA lender in the North Bay, providing the government-backed portion for $24.8 million in 504 loans in Sonoma, Napa, Solano and Lake Counties. Nine of the company's 28 North Bay loans were for refinancing purposes.
"The biggest overall factor in increasing the number of companies that we could assist and the dollars that we could lend was due to the refi program," said Jim Baird, CEO of Bay Area Development Co.
Approximately 34 percent of the $15.09 billion in 504 loans nationally was attributed to the temporary program, with similar proportions seen in the North Bay. For the 23 refinancing loans that his company completed, Mr. Baird estimated that borrowers will save a combined $75,000 per month in occupancy costs.
"It's a lot of cash flow to be retaining for businesses so they can be adding inventory and creating jobs," he said.
While the program has expired as of Oct. 1, Mr. Baird and others said there are currently a number of efforts to lobby Congress to authorize a permanent 504 refinance program.