SBA loan program back in business

CNY Business Journal (1996+), Jan 16, 2004 by Rombel, Adam

SYRACUSE - After an eight-day shutdown, the U.S. Small Business Administration has at least temporarily reopened a popular federal-loan-guarantee program for small businesses. The news has cheered local lenders and their customers.

On Jan. 6, the SBA suspended guaranteed loans under the Section 7(a) program that provides up to $2 million to small businesses seeking money to start or expand businesses. The program's money ran out due to unprecedented loan demand and because Congress has yet to approve funding for the current 2004 fiscal year.

But on Jan. 14, the SBA reopened 7(a), albeit with a reduced loan cap of $750,000, after obtaining $470 million in temporary funding from Congress. The money is supposed to keep the program running through Jan. 31. The SBA will need Congress to pass its 2004 budget or approve another temporary measure to keep 7(a) going after that. In the meantime, lenders will take what they can get.

"I think it's great news. We'll be able to satisfy the financing needs of our small businesses," says Lee DeAmicis, regional manager for business banking in the Central New York region for M&T Bank, which regularly is one of the most active providers of SBA-backed loans in the region. When SBA stopped guaranteeing loans, M&T had 13 loans, totaling about $2.5 million, in the works under the 7(a) program in Central New York. DeAmicis is relieved to have the program back online.

"The push to shut down the program caused a lot of angst and pressure," he says. "It's great to have it back."

DeAmicis adds that the lowered maximum loan amount won't affect his business because 99 percent of the loans he makes are under $750,000.

The shutdown and subsequent restarting of the SBA's 7(a) program had local small-business lenders and their clients feeling like yo-yos. During the eight days the program was in hiatus, lenders and their small-business customers were forced to sit and wait on the sidelines and track developments.

"We're very interested in the 7(a) program. It has a big impact on us," Gregory Gilroy, regional president for Fleet Bank's Utica/Syracuse district, said a day before the program was restarted.

Fleet Bank, one of the top two or three area providers of SBAbacked financing to small businesses, had at least a few customers with already-approved transactions that were conditioned on SBA backing the loan. But then came the SBA's decision to halt the program.

Bankers are hoping it doesn't happen again.