Small businesses in the Buffalo and Rochester regions took out fewer loans and borrowed less money during the last 12 months through a federal government program aimed at helping small businesses obtain financing.
But the head of the Small Business Administration's Buffalo office said it is difficult to pinpoint why.
The SBA's 7(a) loan program, which caters to businesses that might otherwise have trouble obtaining financing, recorded 872 loans during the fiscal year that ended Sept. 30, down 20 percent from 1,089 a year ago. The total dollar value of those loans fell 10 percent to $141 million, from $156 million the year before.
Franklin J. Sciortino, the SBA's Buffalo district director, said it's possible the types of businesses that might apply for SBA loans found other avenues for financing.
"Our guarantee doesn't make a bad loan good, it makes a good loan better," Sciortino said.
The 7(a) program guarantees as much as 85 percent on loans of up to $150,000, giving lenders more confidence to do business with those customers. Customers use the loans for purposes like expansion or renovation, acquiring land or buildings and working capital.
M&T Bank for the 23rd straight year led the 14-county Buffalo district in both number of loans and volume in the program. But the bank's numbers were down from a year ago, too. Its 7(a) loan total fell 42 percent from a year ago, to 217, and its dollar volume dropped 12 percent, to $25.7 million.
Eric Feldstein, M&T's senior vice president for business banking, said the drop was largely the effect of a one-year spike that occurred in fiscal 2016. By comparison, M&T's numbers for fiscal 2015 were comparable to this year's totals, he said. The spike occurred in March 2016, when M&T introduced its "Quick App" process in upstate New York for 7(a) loans under $25,000, promising faster underwriting. There was significant pent-up demand for that product, from customers that might have used a credit card instead, he said. "That demand has normalized," Feldstein said.
Since M&T accounted for nearly one in four loans through the program in the Buffalo district, its results heavily influence the region's totals. The bank declined to specify what percentage of its loan activity is generated through the SBA's 7(a) program. But in 2016, M&T ranked No. 6 in the country in the program.
"The SBA is an extremely important resource to small business owners," Feldstein said. M&T has had "many success stories" of businesses that began with a $25,000 SBA loan and have blossomed into thriving companies, he said.
Among all lenders in the SBA program in the Buffalo-Rochester area, the average loan size was $161,612, up from $142,916 in 2016. But a few exceptionally large loans can skew the average. For instance, a New York City-based bank, Savoy Bank, made a single loan for $5 million, which is the largest amount allowed under 7(a). Another lender, Texas-based Mint National Bank, had just one loan for nearly $3 million.
The pool of participating lenders in the Buffalo district has grown, to include banks that don't have branches in Western New York. In the 2017 fiscal year, 43 lenders participated, compared to 37 the year before.
One bank that disappeared from the list: First Niagara Bank, which was acquired by KeyBank last year. In 2016, First Niagara had the fifth-most loans in the program, at 68, while Key had 27. This year, Key had 43.
ESL Federal Credit Union, based in Rochester, ranked second in the number of loans behind M&T, with 127. Five Star Bank ranked second to M&T in dollar volume, at $16.7 million.