As the economy continues to flourish, the demand for loans has followed suit.
According to the U.S. Small Business Admission Administration’s Michigan District Office, Michigan bank lenders have set a new record. SBA lending in the state grew 15 percent to $912 million.
The total loans supported by SBA in Michigan, which includes 504 third-party loans, exceeded $1 billion for the first time with 2,700 SBA loans issued in the state. The number of loans increased by 2.6 percent.
Horizon Bank issued five loans in West Michigan (Allegan, Kent, Muskegon and Ottawa counties) that amounted to $414,000 in 2017, according to the SBA’s Michigan District Office. Scott Ellison, vice president and government program manager of Horizon Bank, said that is a part of a growing trend.
“We have had a fairly significant increase in our SBA activity in the last five years,” Ellison said. “We have increased to the point where we need to plateau off a little bit. We have had a 30 percent growth in our portfolio.”
Due to the increase in commercial loans, as a result of the growing economy, SBA loans are needed. The unemployment rate in Michigan for the month of July was 4.5 percent, which dropped from 4.8 percent when the year started, according to the U.S. Bureau of Labor and Statistics.
Michael Moraw, vice president and senior SBA product specialist at Huntington Bank, said the bank’s production tends to mirror that of the industry production of SBA lending.
“Collateral tends to be a significant criterion for businesses that utilize SBA lending,” he said. “I see a lot of service businesses utilizing SBA financing due to limited hard assets of business available to collateralize (secure) the loan.”
Some of those who qualify for SBA loans, Ellison said, are new business owners, restaurant owners and employees who want to acquire a business from the owner.
Although the cap for the SBA lending program is $5 million, Moraw said people in the manufacturing industry tend to qualify for SBA loans because their equipment can be expensive, and as a result, their maximum limit on an SBA loan can go up to $5.5 million. He said the maximum loan limit previously was $2 million.
However, with the maximum loan amount raised to $5 million, SBA lenders allow borrowers a longer time, up to 10 years, to repay the loan amount.
The manufacturing industry made up 20 percent of West Michigan’s jobs market, the highest in the region in 2017, according to The Right Place. The industry provided 151,814 jobs in the region for 2017.
Without SBA loans, commercial loans would be denied for businesses without tangible assets such as land, buildings, investments and/or inventory.
“Because the SBA is available, we are able to make loans to these emerging businesses … which are creating employment,” Ellison said. “Banks are interested in helping those higher-risk businesses, but without SBA’s support, we couldn’t do it.
“There are a lot of opportunities out there for businesses to expand, grow, start up. SBA loans are designed for them; it’s the solution to that situation. As a result, the demand for SBA loans has gone up.”