Leading experts are reporting that Small Business Administration loan funding is on the decline. Many brokers have found that as many as half of the banks that usually would offer SBA loan programs have now backed off of offering these types of loans. With many businesses being classified as a “small business”, these decisions are sure to have a negative impact for many who depend on these services.
Banks will make their decisions to curtail SBA lending based on what is happening in the economy, credit issues and the inability to sell SBA loans in the secondary market.
Even though the SBA usually guarantees loans up to 75 percent, many banks are worried about credit quality and the remaining 25 percent that is not guaranteed by the SBA. Some banks are taking a closer look at business owner’s home equity because the home is often the collateral used for some Small Business Administration loans. It should be noted that some larger banks are increasing their SBA loan activity. These banks are taking on loans that used to be easily obtained at smaller lending institutions. They are more liberal and completing more traditional loans.
The big question is…was the SBA to liberal in the past? Is the trend now more complex for companies in need of a loan? Most importantly, how will these new decisions affect small businesses overall?
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