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SBA Lending Volume Slips Due To Expiration Of Mortgage Refinance Exemption

Written by Ken Gaebler
Published: 11/14/2013

SBA's fiscal year 2013 loan volume drops as refinancing provisions of the 2010 Small Business Jobs Act expire; total number of SBA loans rises slightly.

The Associated Press recently reported that the volume of SBA loans provided to small companies fell during the agency's most recent fiscal year, from $30.25 billion in 2012 to $29.6 billion in 2013.

SBA Lending Volume Lower

The Small Business Administration's (SBA) loan guarantee programs make it possible for thousands of small companies to receive the financing they need to expand and grow their businesses.

Without programs like the SBA's 7(a) and 504 loans, many of these small businesses would be severely under-capitalized, since commercial lenders are hesitant to provide non-guaranteed loans to smaller operations.

But while the dollar volume of SBA loans decreased, the total number of loans was up from 53,848 in 2012 to 54,106 in 2013. This could be a sign that business owners are serious about growth and expansion opportunities, and are looking for ways to fund their growth agendas.

The decrease in 2013 lending is attributable to the expiration of provisions in the 2010 Small Business Jobs Act that allowed entrepreneurs to use 504 loan proceeds to refinance existing mortgages. Prior to the implementation of these provisions, the use of 504 loans was restricted to the purchase or expansion of property. The refinance exemption was temporarily granted as a way to help small companies during the economic recovery.

The SBA's other popular loan guarantee program, the 7(a) loan program, offers a general purpose lending vehicle designed to help business owners finance startups, expansions and other activities.

Based on SBA numbers, the volume of 504 loans fell to $11.7 billion in 2013 from $15.1 billion in 2012. The SBA has not yet released 7(a) loan figures for fiscal year 2013.

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