The SBA’s flagship 7(a) program is well on its way to another record year with total loan approvals at $17.47 billion through 47,583 loans in the nine months to June. While the number of loans approved has jumped 5% compared to the same period last year, the loan amount has spiked by 8%.
The growth in volumes has been helped by the increased interest which small banks are showing in pushing SBA loans. An important reason for this development is that the SBA has introduced several measures to increase its efficiency and compress approval time-frames.
As SBA lending has become more attractive, many small banks have focused their efforts on this niche area by recruiting specialized staff. A report in the American Banker reveals that some small banks have opted for the acquisition route to step up their SBA lending business.
Brookfield-based Ridgestone Bank, an SBA lender, was recently acquired by Byline Bancorp Inc., the parent company of Byline Bank. Through this purchase, Byline Bank will get a presence in Wisconsin for the first time. Byline paid $105 million in cash and stock for the $433 million-asset Ridgestone. A critical factor in this transaction was the fact that Ridgestone operates a national lending platform that originated $165 million of 7(a) loans last year.
In the past, the SBA had a reputation for slow approvals and bureaucratic processes. But it has been working hard to rid itself of this image. Last year, it launched SBA One, an online facility that offers an end to end loan origination solution. In addition to this, lenders benefit from a robust document management system. SBA One has resulted in faster turnaround times and greater efficiency, leading to higher loan volumes.
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The SBA has also launched Leveraging Information and Networks to Access Capital (LINC), a web-based tool to help small businesses looking for a loan to connect with SBA lenders. Using this facility, a private firm seeking a loan just needs to go online and answer a few questions. The completed form is then sent to participating SBA lenders in the applicant’s county, as well as banks and financial institutions that operate in the state or have a national presence.
Interested lenders would then get in touch with the small business that required funds. Speaking about this facility, Maria Contreras-Sweet, head of the SBA said, “Last year, we launched SBA LINC, which is the Match.com version of the SBA. You answer about 20 questions.
“Instead of going to bank after bank with a really slow “maybe,” you might now get five or six, or maybe one or no, bank that comes back and says we are interested in your loan or we are not interested.”
Despite growing volumes of loan business by small banks, the list of 100 most active SBA 7(a) lenders include the nation’s top banks. Wells Fargo tops the list of lenders in the first three quarters of FY 2016 with 6,587 loans with a total value of $1.36 billion. JPMorgan Chase is at number four with 2,468 loans of a value of $552 million.
But Byline Bank’s decision to acquire Ridgestone has been vindicated. The Brookfield lender did business of about $300 million in 7(a) loans, almost doubling the volume achieved in the previous year.
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