SBA activity grew in fiscal ’15 in R.I., with $88.9M in loans made

WHILE THE NUMBER OF SBA-backed loans made in Rhode Island in fiscal 2015 declined from the year before, total dollar volume increased, according the U.S. Small Business Administration's final report on the year.
WHILE THE NUMBER OF SBA-backed loans made in Rhode Island in fiscal 2015 declined from the year before, total dollar volume increased, according the U.S. Small Business Administration's final report on the year.

PROVIDENCE – Despite an overall reduction in the number of taxpayer-backed loans made in Rhode Island last fiscal year, small business loan dollar volume grew 2.8 percent thanks largely to an increase in financing for fixed assets, such as real estate and machinery.

U.S. Small Business Administration data show there were 366 SBA-backed loans made in the Ocean State totaling $88.9 million during fiscal 2015, which ended Sept. 30. The lending represents a $2.4 million – or 2.8 percent – increase from fiscal 2014.

Much of the growth came from the federal agency’s 504 loan program, which is split three ways between a small business borrower – who puts up 10 percent – a lender – which puts up 50 percent of its own capital – and a certified development company, which contributes 40 percent derived from SBA-backed bonds.

In Rhode Island, 504 project participation from lenders increased 33.1 percent to $32.6 million on 34 loans, according to the data from SBA’s Rhode Island office.

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The loan program is designed to help finance existing small businesses with the purchase of a variety of fixed assets, including big-ticket items and real estate.

Mark S. Hayward, district director of SBA in Rhode Island, says the increase in this specific program “bodes well for the [Rhode Island] economy.

“It allows businesses to access reasonable dollars at reasonable rates over a long period of time,” Hayward said.

Despite the increase in the dollar volume of the 504 loan program, however, the total number of SBA-backed loans in Rhode Island dropped by 67 to 366 in fiscal 2015. The reduction is largely due to a 19.1 percent decrease in the number of 7(a) loans, which is designed to help small businesses and entrepreneurs with working capital.

The Rhode Island decrease bucks a trend seen elsewhere in the nation.

Indeed, the demand for SBA-backed 7(a) loans last fiscal year was so great that Congress in July was temporarily forced to suspend the lending program after it reached its $18.7 billion annual loan limit. Congress subsequently raised the cap to $23.5 billion and lending resumed.

But the increased demand for this type of SBA-backed loans didn’t reflect what was seen in Rhode Island, where the total number of 7(a) loans decreased from 392 loans totaling $67.6 million in fiscal 2014 to 317 loans totaling $64.8 million in fiscal 2015.

Hayward says attributes the decrease to there simply being ebbs and flows in 7(a) lending in Rhode Island, adding that while there were less loans overall, the average amount for each loan grew by about $40,000.

“We’ve seen cycles of both up and downs,” Hayward said. “Last year was significantly up from the prior year and that’s just the way the economy goes.”

SBA microloan lending also increased from seven microloans totaling $167,460 in fiscal 2014 to nine microloans totaling $345,000 in fiscal 2015.

The lenders

Cranston-based Coastway Community Bank made the most 7(a) SBA-backed loans, with 57 totaling $6.6 million and BankNewport, of Newport, made the most 504 loans with 12 totaling $18.5 million.

The Rhode Island SBA ranks lenders by the number of approved 7(a) loans. The top five lenders were:

  • Coastway Community Bank, 57 loans totaling $6.6 million (2014 rank: No. 1)
  • Bank Rhode Island, 38 loans totaling 2.9 million (2014 rank: No. 2)
  • Independence Bank, 31 loans totaling $6.5 million (2014 rank: No. 5)
  • Citizens Bank, 26 loans totaling $4.8 million (2014 rank: No. 3)
  • Freedom National Bank, 20 loans totaling $2.5 million (2014 rank: No. 4)

Santander Bank loaned the most amount of money through the SBA’s 7(a) loan program, with 145 loans totaling $6.9 million.

The increased demand for SBA-backed loans seen nationwide is thought to be in part because of a new program introduced in 2013, which waves fees on any 7(a) loan made totaling less than $150,000.

Some financial institutions have tailored their SBA lending practices around that model, such as Independence Bank, which offers SBA-backed loans totaling less than $150,000, according to Hayward. Independence Bank made the third-most 7(a) loans, with 31, and Hayward says 82 percent of all 7(a) loans made last fiscal year were within the $150,000 threshold.

Bay Colony Development Corp. participated in the most 504 loans as a certified development company with 14, totaling $14.3 million. South Eastern Economic Development Corp. made the most SBA microloans with seven totaling $265,000, according to the SBA.

Citizens Bank, a Citizens Financial Group Inc. company based in Providence, ranked No. 60 among the top 100 most active SBA lenders in the nation, according to the SBA.

When asked what’s next for the SBA, Hayward responded much as Bill Belichick, head coach of the New England Patriots, would.

“We’re on to fiscal 2016,” Hayward said. “We have a lot of work ahead of us.”

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