Small Business Loan Guarantees Growing
By Scott Blake
Small businesses in South Florida are on pace to receive more federally-guaranteed loans this year, a sign that the region’s economy is on the upswing, according to a US Small Business Administration official.
Headquartered in Miami, the SBA’s South Florida District issued 919 loan guarantees to small businesses totaling $470.4 million in the six-month period from October through April, SBA statistics show.
The SBA said those loans helped create an estimated 4,751 jobs in the district, which covers 24 counties, including Miami-Dade and Broward.
The 919 loan guarantees in the first half of the agency’s fiscal year is on pace to exceed the roughly 1,600 guarantees the SBA provided in all of the previous fiscal year, said SBA South Florida Deputy District Director Jonel Hein.
"I’m not saying we’re out of the recession," Ms. Hein said, but the numbers suggest an economic improvement.
Improvements in the housing market also have helped small businesses, whose owners sometimes use their homes as collateral for loans, Ms. Hein said.
However, "we’re not back to where we were pre-recession," she said, when the SBA South District was guaranteeing up to 4,000 loans a year.
The SBA doesn’t make direct loans to small businesses. Rather, the agency guarantees that the loans will be repaid, thus eliminating some of the risk for banks and other lenders, usually making them more willing to lend.
In addition to loan guarantees, the SBA makes an impact on the economy by administering or assisting with a slew of government contracts to small businesses. The agency also provides small business counseling services and helps administer disaster relief, Ms. Hein said.
One element that is curtailing the SBA’s assistance for small businesses is the federal sequestration budget cuts that have gone into effect this year, Ms. Hein said. As a result, she added, some 2,000 small businesses nationwide that otherwise may have received loan guarantees or other assistance are expected not to receive it this year.
Still, small businesses in Miami-Dade received the most loan guarantees of any county in the South Florida District from October through April, with 233, followed by Broward with 168, SBA statistics show.
In Miami-Dade, for example, amounts of the loans ranged from $5,000 to $5 million. The $5 million loan, from SunTrust Bank, went to a jewelry, watch and precious stone business in Miami.
The single-largest job creator was a $3.2. million federally-backed loan from Florida First Capital Finance Corp. that went to a courier business in Doral that created 50 jobs, statistics show.
About 75% of SBA-backed loans go to existing businesses, while the other 25% go to new businesses, according to Ms. Hein. The SBA sometimes guarantees up to 75% to 90% of the loan amounts, she said.
"The risk is relatively small," she added. "Our loss rate is only 2%."
The SBA offers four main types of loan programs:
nThe 7(a) Loan Program is the SBA’s primary program to help start-up and existing small businesses obtain financing when they might not be eligible for business loans through normal lending channels.
nThe CDC/504 Loan Program is a long-term financing tool, designed to encourage economic development within a community. It provides small businesses with long-term, fixed-rate financing to acquire major fixed assets such as equipment or real estate.
nThe Microloan Program provides small, short-term loans to small businesses and certain types of not-for-profit childcare centers.
nGuaranteed Loan Programs: Banks and other lenders offer a number of SBA-guaranteed loan programs to assist small businesses. While the SBA itself does not make loans, it does guarantee loans made to small businesses by private lenders and other institutions.
This week, Ms. Hein said, the SBA will start a Veterans Pledge Initiative to encourage lenders to provide more loans to small businesses owned by US military veterans.
In addition, the SBA’s Miami office is encouraging more small businesses to get involved in the area’s import/export industry. Ms. Hein said the industry already has a significant local presence due to Miami International Airport and Port Miami.
She noted that the local cargo transport industry is expected to grow in the future with seaport’s tunnels and dredging projects and a new rail connection from the seaport to a cargo center near the airport — initiatives planned to coincide with the opening of the expanded Panama Canal in 2015.
"A lot of small businesses don’t do it [import/export] because of fear of the unknown," she said. "We’re trying to educate people to take the fear and mystery out of it." To read the entire issue of Miami Today online, subscribe to e-MIAMI TODAY, an exact digital replica of the printed edition.