SBA-backed loan volume jumps 30%

CASH INFUSION: Linda and Bill Bohmbach, founders and owners of Home Healthsmith LLC in Portsmouth, recently secured some working capital through the U.S. Small Business Administration of Rhode Island, part of which they used to purchase a new work truck. / PBN PHOTO/ MICHAEL SALERNO
CASH INFUSION: Linda and Bill Bohmbach, founders and owners of Home Healthsmith LLC in Portsmouth, recently secured some working capital through the U.S. Small Business Administration of Rhode Island, part of which they used to purchase a new work truck. / PBN PHOTO/ MICHAEL SALERNO

Linda and Bill Bohmbach, married co-owners of Portsmouth-based Home Healthsmith LLC, founded the business because they wanted to empower people with the mobility and safety to age comfortably in place.

What started first as an idea and a side business quickly grew into a full-fledged company in 2012 requiring the full attention of the duo, who had already worked full careers elsewhere.

Fast forward to 2016 and the company’s growth has continued to a point where the Bohmbachs have been forced to expand into a larger space. They applied for and received a loan backed by the U.S. Small Business Administration of Rhode Island.

Home Healthsmith, which offers products that include elevators, lifts and wheelchair ramps, is one of 259 borrowers this fiscal year through the SBA’s flagship 7(a) loan program, representing a 30.1 percent increase compared with the same period last year. The year-over-year bump is largely attributable to a larger volume of smaller loans.

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“We have a significant portfolio that’s made up of the smaller loans,” said Mark S. Hayward, district director of SBA Rhode Island.

Indeed, the dollar volume to Rhode Island small businesses through April (the SBA fiscal year begins Oct. 1) totaled $87.9 million, representing a 6 percent increase compared with the same period a year earlier. Of the 259 loans, 148 amounted to less than $150,000, which Hayward suspects has a large part to do with the fact that the administration waives all fees on loans that fall below that amount. The fee savings for lenders and borrowers through March totaled about $157,000.

On the lending side, small financial institutions continue to lead the pack, especially in volume, as four of the top five lenders are community banks, including Rhode Island’s smallest: East Greenwich-based Independence Bank.

“Since we specialize in small-business lending, our revenue is primarily derived from it,” Robert A. Catanzaro, bank president, told Providence Business News. “Since the financial crisis of 2008, we have seen many of the larger banks cut back on their small-business lending. We see many small businesses that are healthy, but have increased accounts receivable. Cash flow is tight. Customers just aren’t paying as fast as they used to, but the small business still needs to make payroll each week. Our working-capital loan provides a financial cushion to the small business.”

Following the economic downturn, smaller lending institutions largely started filling a void left behind by bigger banks in Rhode Island’s small-business lending field. The trend has remained fairly constant ever since, although Hayward does recognize one anomaly.

“Citizens [Bank NA] … seems to be coming back into the market pretty aggressively,” he said.

Kevin Ferryman, senior vice president and SBA director at Providence-based Citizens Financial Group Inc., parent of Citizens, acknowledges the increased attention given to SBA lending, saying the bank for the past few years has been making a bigger investment into its SBA-lending capabilities. Ferryman, who joined Citizens after the bank went public in 2013, was asked to grow the SBA-lending program. The bank now has 12 people covering SBA-lending across its footprint.

“We expect SBA to be a big part of our strategic plan to do more small-business lending in the footprint,” Ferryman said. “The bank benefits because we get more customers, more loans. But more importantly, this is the type of lending that our customers are looking for and we’re able to deliver their needs.”

Through April, Citizens in Rhode Island made 27 loans through the SBA 7(a) loan program, designed to provide working capital, totaling $3.5 million. It made one loan through the SBA 504 program, designed for big-ticket items, totaling $2 million. Ferryman, who oversees the bank’s entire 11-state footprint, says competition with smaller lenders is especially tight in the New England region. But he argues there are advantages to dealing with a bigger bank.

“We bring big-bank products and big-bank opportunities with a small-bank approach,” he said.

Nonetheless, small financial institutions are leading the way in Rhode Island SBA lending. Coastway Community Bank leads the 7(a) loan program, having made 27 loans totaling $7.4 million through April. BankNewport has made the most loans through the 504 loan program with eight, totaling $8.4 million during the same period. Ocean State Business Development Authority, a certified development company, contributed the largest debenture amount, a part of the 504 loan program, with 14 loans totaling $11.1 million.

South Eastern Economic Development Corp. made the most SBA microloans with two, totaling $70,000.

Hayward expects the strong lending year to continue throughout the rest of the fiscal year.

“It’s reflecting more vibrant economic conditions for the small-business community,” he said. •

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