SBA Lending in Arkansas Rises in 2013

by Luke Jones  on Monday, Nov. 4, 2013 12:00 am  

(Editor's Note: A correction has been made to this article. See the bottom of the article for details.)

Good news for the state’s small business environment: The number of loans from the U.S. Small Business Administration is increasing nationwide, and Arkansas is no exception.

In Arkansas, for the SBA’s fiscal year ending Sept. 30, 237 loans worth a total of $116 million were approved. Compare that to 2012, when it approved 194 loans for a total of $93.9 million.

Linda Nelson, director of SBA’s Arkansas district, said the state’s business environment is improving and its “startup ecosystem” is developing, particularly in northwest Arkansas.

Nationwide, the SBA showed similar improvement, announcing that it supported loans worth $29 billion, or 54,106 loans. SBA Administrator Jeanne Hulit credited the Obama administration for its support of small business programs.

With SBA loans, the administration acts as a sort of mediator between the bank and the entrepreneur.

“The bank has the money; the borrower needs money,” Nelson said. “The bank has power but they have to mitigate their risk in lending.”

The banks’ risks are typically lowered by shortening the time of the loan and increasing interest, then seeking collateral.

“When you shorten the term, you’re putting more risk back on the borrower,” Nelson said. “Small businesses are already risky operations, no matter what. They could be doing everything right and then the economy deals them a blow.”

So the SBA offers a guaranty for the lender, reducing its risk while saving the business owner from putting more assets on the line.

The SBA offers loans both for launches and expansions. In 2013, 103 went to new businesses and 134 went to existing ones. Nelson said that’s more new businesses than in previous years.

“We are also seeing more activity in the SBA Express program,” Nelson said. “It’s very simple and has only a 50 percent guaranty. That gives better flexibility for the borrower, and many of them do need a line of credit versus term working capital. I think ... another reason the SBA exists is that working capital is typically harder to come by for businesses than finding something tangible attached for collateral.”



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