Stimulus helps SBA-backed loan volume to bounce back

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Loan dollar volume has surged 30 percent in N.J. since recovery act was signed.Changes to U.S. Small Business Administration loan programs as a result of the federal stimulus act have sparked a rebound in the volume of SBA-backed loans in the Garden State, the agency said.

Since the American Recovery and Reinvestment Act, commonly called the federal stimulus, was signed in February, SBA said it has approved 1,009 loans totaling $336.2 million in New Jersey; more than 600 loans totaling $234.3 million were approved for small businesses in the state. Since March, average weekly loan dollar volume in New Jersey has increased to $7 million, or 30 percent, from January and February, when the volume was $5.3 million.

Nationally, SBA used $375 million of the $730 million it received from the stimulus to create two major changes in its loan programs, said Jim Kocsi, the agency’s New Jersey district director, in Newark. One was raising SBA’s guarantee to lending partners to 90 percent, from a 50 to 85 percent guarantee prior to the signing of the federal legislation.

“That offered a rather strong inducement for lenders to make loans to small businesses, because many before the recovery act were quite reluctant to make those loans,” Kocsi said. “That caused a bump in activity.”

The other change was waiving the guarantee fee the agency assesses on the loans it supports; that fee is almost always passed down from the lender to the borrower, he said. The guarantee fee, based on a sliding scale, can range from $2,500 for a $150,000 loan to $53,750 for a $2 million loan, Kocsi said. Waiving the fee provides “more money in the pockets of small-business owners that could certainly use it.”

The agency projects that the money allocated to the enhancements of its loan program will run out by the end of the calendar year, he said. But “we’re hopeful that with the pickup in the economy and the relaxation of some of these lenders with their loan standards, that our guarantee will continue to induce them to make more loans.”

E-mail Evelyn Lee at [email protected]