A GOOD FIT: When Alayne White, owner of Alyne White Spa, needed a new home for her business, Freedom National Bank worked with her to create a financing package that helped her with working capital as well as upgrading her new location in Bristol. Ashley Piccerelli gives a facial to customer Kerry Santerre.
Lending to small businesses through U.S. Small Business Administration programs is on the upswing in Rhode Island, thanks in large measure to the efforts of community banks, although a traditional SBA powerhouse is back on course in the Ocean State.
“It seems there’s been aggressive response to the market from the smaller, local, community banks – Coastway Community Bank, Bank Rhode Island, Independence Bank and Freedom National Bank – their lending has gone up significantly,” said SBA Rhode Island District Director Mark S. Hayward.
Those four banks, in that order, are the top four SBA lenders in the state as of March 31 for the fiscal year that began Oct. 1, 2013. That ranking is for SBA’s 7(a) loans, the most common program that provides capital for businesses to use for general purposes.
SBA-supported loans to Rhode Island businesses totaled $41.9 million from Oct. 1, 2013, through March 31, 2014, a 20 percent increase over the $34.9 million in SBA loans during the same period a year earlier. Those totals include 7(a) loans, as well as participation in the SBA’s 504 program, under which a bank is responsible for 50 percent of the financing, the SBA for 40 percent through a certified development company and the borrower for 10 percent. The 504 loans can be used for the purchase of real estate and large equipment. The total SBA loan amount also includes microloans, which since fiscal 2010 all have been done through the South Eastern Economic Development Corp., based in Taunton.
Banks lending into the Ocean State did 172 SBA loans during the first six months of the fiscal year, compared with 135 loans a year earlier, said SBA Rhode Island Economic Development Specialist Norm Deragon.
One likely reason for the increase in SBA lending is the elimination of fees to borrowers and lenders for loans up to $150,000 in fiscal 2014, Deragon said.
That fee elimination hits right where Rhode Island small businesses are likely to take advantage of it.
“Seventy-eight percent of all our loans are under $150,000,” said Hayward. “So I think having no fees to borrowers and no fees to lenders has been a huge factor in small businesses getting access to capital.”