Minnesota OKs more SBA-backed loans

Article by: Chris Serres , Star Tribune
Updated: October 16, 2009 - 8:38 PM

Minnesota bucks national trend, sees rise in SBA-backed loans.

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In sharp contrast with lenders in most of the country, banks in Minnesota this year have approved slightly more loans backed by the U.S. Small Business Administration, though the total dollar amount declined.

The Minnesota district office of the SBA said this week that banks in this state approved 2,134 loan guarantees totaling $451 million during the fiscal year ended Sept. 30, compared with 2,128 loan guarantees totaling $502 million over the same period a year ago. By comparison, SBA loan approvals plunged 35 percent nationwide over the same period. The Minnesota office ranked second in total loan approvals of 68 SBA offices across the country.

However, a rise in SBA lending is not necessarily an indicator of a recovering economy or a sign that banks are once again increasing their lending. In some cases, banks pursue SBA guarantees for loans because they are reluctant to underwrite them on their own without the government guarantees, according to an SBA official in Washington. Banks can increase their SBA volumes, while still curbing their overall lending to borrowers.

Even so, an uptick in SBA loans is good for Main Street businesses and is considered unusual in the midst of a severe recession. The SBA got a big boost in February when the Obama administration created the Recovery Act, which eliminates certain fees to borrowers on SBA loans and allows the agency to guarantee up to 90 percent of each loan. Largely as a result of the stimulus bill, average weekly loan volume has more than doubled since March, according to the agency.

More than 240 lenders issued SBA loans in Minnesota in the past year.