WASHINGTON (Blue MauMau) - Small Business Administration loans have been shriveling up, and not just of late. SBA 7(a) loans have plummeted from 2005's $15.4 million down to $12.8 in 2008, with the trend accelerating during the present credit crunch. Through early January in this fiscal year that began October 1, 2008 for the SBA, 7(a) loans plummeted 56 percent compared to the same period in the prior year.
What's going on?
According to an industry expert, one reason is that small business demand for SBA loans has evaporated.
Mark J. Weiss, CEO of LeaseWise, LLC, a provider of small business funding solutions, states, "People are afraid to invest in new businesses. They're taking a wait and see attitude while watching other businesses close up." Perhaps, he feels, investors would rather sit on the funds they still have, in case they need a personal reserve for other purposes. Perhaps the impact on their 401K is making them feel less secure. With housing values crashing, the collateral value to support loan requests isn't what it used to be.
But there's an even bigger problem besides skittish business buyers. "Many lenders have pulled out of SBA lending altogether — whether it's secondary market issues or risk management, the result is the same,” adds Weiss.
Chris Hurn, chief executive officer of Mercantile Commercial Capital, a lending institute specializing in SBA 504 real estate and equipment loans, agrees. "SBA loans normally take off in a recession, but this time around SBA lending has not taken off, mainly because of other issues relating to banks which are outside the SBA's realm.".....cont.
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