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SBA loans still lagging locally from a year ago

Small-business lending activity under government-guaranteed programs in Western New York continued to languish in May far below the levels of a year ago, as lenders failed to keep up with the brisk pace they had posted while the federal government waived fees and raised limits.

As of the end of May, 20 lenders had made 200 loans totaling $32.92 million in the Buffalo and Rochester areas so far this fiscal year under the U.S. Small Business Administration's primary 7(a) loan program.

That's about one-third of the level for both loans and dollars from the period of October through May a year ago, when 28 lenders made 584 loans for $99.1 million. The federal fiscal year runs from Oct. 1 through Sept. 30.

Small-business loans, especially those to newer companies, can be riskier because the companies may not have a track record. So the SBA provides government guarantees of 75 to 85 percent on loans made by private lenders to small businesses, as a means of encouraging banks to make more such loans by giving them comfort that they will be repaid in the event of a default.

Small businesses are widely considered the engine of the nation's economic growth, employing nearly half of private-sector employees and generating 70 percent of new jobs. However, they have struggled to get credit during the recent recession and sluggish recovery, as larger banks in particular have been more hesitant to extend loans while they were still recovering from severe losses they suffered in the financial crisis.

So the Obama administration and Congress passed legislation authorizing incentives for SBA loans, including fee waivers, increased loan amounts and higher guarantees. Those benefits drove a significant increase in SBA lending for a while, even prompting the government to renew them a couple of times, but they have expired. And with that expiration has come a drop in lending activity again.

Locally, as usual, Buffalo-based M&T Bank Corp. led the pack, with 65 loans so far, for $8.31 million. But that's down by 68 percent in number and down by 78 percent in dollars.

M&T regularly touts its small-business lending, both through the SBA and directly to borrowers through its own programs. The bank is ranked No. 18 in the country by assets, but it's the sixth-largest SBA lender nationally, and the third-largest east of the Mississippi River. Within its own market area, it's ranked No. 1 in Buffalo, Rochester, Syracuse, Philadelphia, Wilmington, Baltimore and Washington, D.C.

By number of loans, crosstown rival First Niagara Financial Group is second, with 33 loans, followed by Hamburg-based Evans Bancorp with 27 loans. Warsaw-based Five Star Bank, a subsidiary of Financial Institutions, and Cleveland-based KeyCorp are tied for fourth, with 16 loans apiece, followed by the Bank of Castile, with 11 loans. All were down, but Five Star in particular plummeted from a year ago, when it did 85 loans.

By dollar volume, Evans was second, with $7.15 million; followed by First Niagara, at $4.46 million; MB Financial Bank, with $4 million from a single loan; Live Oak Banking Co., with two loans for $2.18 million; and Key, with $1.71 million.

Lenders also made 11 loans to exporters, totaling $3.78 million, and 18 loans to businesses owned by military veterans, for $2.9 million.

In the SBA's separate 504 program for "certified development company" loans to businesses for the purchase of property and other fixed assets, 12 banks have made 27 loans for $17.6 million through May. M&T led with eight loans for $4.3 million, followed by Evans with five loans, HSBC Bank USA with three loans, and Bank of Castile and First Niagara with two each.

By dollars, Wells Fargo & Co. was second, with $2.47 million in a single loan, followed by ESL Federal Credit Union in Rochester, with one loan for $2.4 million. HSBC was next at $2.13 million, followed by Castile with $1.82 million and Evans with $1.58 million.