Small Business Loans In Ohio – Annual lending through the U.S. Small Business Administration’s flagship 7(a) and 504 loan programs fell nationwide in fiscal year 2019, and even more so in the Cleveland region.
The SBA’s lower activity in the previous fiscal year — which ended Sept. 30 — may be due to a generally strong economy, a government furlough that temporarily closed SBA offices and increased competition among banks, as well as pressure from its nonbank peers.
Small Business Loans In Ohio
The Cleveland SBA District processed 1,480 loans last year (down 18.2%), totaling $412.6 million (down 9%). Those declines follow five years of stable credit activity.
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“The agency experienced a five-week shutdown in late December. We were unable to make loans during the federal government shutdown. Some of that lost volume has been made up, but not all,” said Gil Goldberg, director of the Cleveland SBA District, which covers 28 counties in northern Ohio. “On the positive side, the economy generally performed well in fiscal 2019. That meant our lenders felt more comfortable lending conventionally and didn’t need our support as much as they did in the past.”
By a wide margin, the market leader in SBA lending in this region is still Huntington Bank, which made 896 of those loans, totaling $128.9 million. That’s more than 60% of all loans and 31% of all dollars borrowed in Cleveland County.
“In times of great prosperity, we use the (SBA) program to help businesses start up, grow and expand when they rely on projections, to offset the lack of collateral and to help bridge the transition from one to the other through acquisitions,” Maggie Ference said. , Huntington’s SBA program director, explaining the bank’s approach to the SBA program. “If the economy slows, we will see more refinancing of conventional debt that was structured too aggressively for a company that is now suffering from lower top-line revenues, balance sheet consolidation and help with reduced valuations.”
“We are seeing some stabilization in program utilization, which has led to a decline in numbers for the first time in nine years, as well as continued economic health that keeps conventional options available for stable companies across the country,” Ference said.
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Nationwide, there were about 58,000 total SBA loans made in fiscal 2019 (down 12.4%), totaling $28.07 billion (down 6.8%), according to federal data.
With 3,594, Huntington leads all other banks in the country in total loans issued, and ranks third in total dollars given, with $640 million.
At $1.3 billion, the largest SBA lender by dollars is Live Oak Banking Co. based in North Carolina (SBA lending is his specialty.)
In Cleveland, major SBA lenders behind Huntington include non-bank lender Grovth Capital Corp. (57 loans totaling $3.9 million), US Bank (44 loans, $6.2 million), KeyBank (42 loans, $19.6 million), and PNC Bank (35 loans, $5.2 million ).
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In FY 2018, Cleveland County had the most loans ever made to “new” businesses (65%) over existing businesses. In the past year, “new” businesses accounted for only 26% of loans.
Goldberg said that was largely due to the number of baby boomers who sold their companies in fiscal 2018. In the SBA program, “new” company loans include those made to new owners of an existing business.
The composition of loans issued by industry is relatively consistent. Non-food service activities continue to draw the most loans (35%), followed by transport (16.5%), construction (16.4%), food services (11.8%), retail (9.1%), manufacturing (8 .2%) and wholesale (3%).
SBA lending to the manufacturing industry was down from the previous year (when it was 9% of all loans), declining more than other sectors, which could be a sign of growth in the industry.
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Bill Adams, Ohio-based senior economist for PNC Financial Services, noted that manufacturing in particular is slowing overall and has become more conservative in its credit needs in response to global trends.
That slowdown naturally hits Ohio harder because manufacturing continues to play a large economic role compared to other states.
“Ohio’s most global manufacturers are, I think, affected by the uncertainty around trade policy and tariffs,” Adams said. “With most global companies slowing investment plans pending clarity, this has affected demand for smaller and less global manufacturers in the state.”
However, according to a recent Beige Book update from the Federal Reserve Bank of Cleveland: “Several producers have suggested that their customers are allowing inventories to run too low in anticipation of a more significant slowdown in production than is materializing.” As a result of the need to restock, demand for these manufacturers’ products has increased in recent months.”
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Goldberg noted that in the first few weeks of fiscal year 2020, lending is increasing compared to previous years. But it’s too early to call it a trend.
In fact, the Fed reported that while many of its contacts expect continued economic expansion, they are also generally tempering their outlook for growth over the next six to 12 months.
Reports from the Federal Reserve Bank of St. Louis show that demand for loans in the small business sector has weakened consistently across the U.S. over the past 12 months.
Regardless of some impact of the absence, Goldberg also hypothesized that lower SBA activity is an indication of increased competition among lenders themselves. That competition is prompting some companies to eliminate the personal guarantees — which apply when someone owns 20% more of the business — that come with government-backed SBA loans, leading to less reliance on the program. That strategy appears as a way to win the borrower’s business.
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“Not all banks do that,” Goldberg said. “Some may look on a case-by-case basis, while others do it more liberally.”
Banks report generally high levels of credit quality during the third quarter. However, less reliance on personal guarantees could be a sign of weakening credit risk policies among financial institutions, something that could materialize on banks’ balance sheets in the coming quarters as bad loans. If that continues, it could be a precursor to the market overheating, which could lead to the same behavior that fueled the Great Recession.
Morning 10 – Essential Ohio business news you need to know to start your day. Apply today. The U.S. Small Business Administration, a federal agency, is now offering long-term, low-interest loans to Ohio businesses and nonprofits struggling financially due to the coronavirus crisis. (US Small Business Administration)
COLUMBUS, Ohio – Ohio businesses and nonprofits struggling due to the coronavirus crisis are now eligible for long-term, low-interest federal loans of up to $2 million each, two U.S. senators from Ohio announced Thursday.
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Economic injury loans, offered through the US Small Business Administration, can be used to pay fixed debt, payroll, debt and other bills that cannot be paid due to the impact of a disaster. Loans are available to businesses of all sizes, although they are only offered to business owners who do not have credit or adequate insurance available elsewhere.
The interest rate on the loans is 3.75 percent for businesses and 2.75 percent for non-profits, according to a statement from the office of Governor Mike Devin. Recipients have up to 30 years to repay the loans.
The exact terms of the loan are determined on a case-by-case basis, based on each borrower’s ability to repay.
Many Ohio businesses have been hurt by a number of anti-coronavirus measures taken by the governor in the past week — most notably the indefinite closure of all bars and restaurants (except for carry-out and delivery) in the state.
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Any business or nonprofit affected by the coronavirus crisis is encouraged to email the Ohio Development Services Agency at [email protected].
In a joint statement, U.S. Senators Sherrod Brown and Rob Portman said the SBA’s swift approval of DeVine’s loan application is good news for small businesses and nonprofits in Ohio.
“This swift approval is critical to ensure that our small businesses and nonprofits have the economic support they need to overcome the significant challenges created by this public health crisis,” the two senators said. “This funding is designed to help them weather this storm and the resulting economic fallout.”
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The signs are displayed in the window of a store in Grosse Pointe Woods, Mich. The Wage Protection Program, which aims to help small businesses survive the coronavirus crisis, has been beset by problems. Paul Sancia/AP hide caption
The signs are displayed in the window of a store in Grosse Pointe Woods, Mich. The Wage Protection Program, which aims to help small businesses survive the coronavirus crisis, has been beset by problems.
Trish Pugh and her husband started a trucking company in Ohio in 2015. Even for a small business, that’s not much — they had two drivers, including her husband, until one was let go because of the coronavirus crisis.
And so her company applied
