When less debt isn’t a good sign

Who's making loans, 2006-15: It's not just that the total number of loans has declined in Rhode Island in the last decade. Who is making loans has changed as well. Here are the top five SBA lenders in the 7(a) program (including ties) for loans credited to the Rhode Island office of the SBA. / Source: U.S. Small Business Administration
Who's making loans, 2006-15: It's not just that the total number of loans has declined in Rhode Island in the last decade. Who is making loans has changed as well. Here are the top five SBA lenders in the 7(a) program (including ties) for loans credited to the Rhode Island office of the SBA. / Source: U.S. Small Business Administration

Debt is a dual-edged sword. For some, it is the bane of economic health. And yet in business, as in personal finance, taking on debt often finances growth, acquisition and activity. Think of mortgages to buy homes or loans to develop a commercial real estate project or buy new equipment for a production line.

Thus, one way to gauge how well Rhode Island’s economy is performing is to look at the volume of loans issued under the U.S. Small Business Administration’s three programs that support working capital, real estate and capital expenditure loans. And, as you might expect, the numbers are not so good.

In fiscal 2006, the period from Oct. 1, 2005 to Sept. 30, 2006, the value of loans guaranteed in some form by the SBA in Rhode Island was $103,104,350. Adjusted for inflation, that number for the just concluded fiscal 2015 was $75,242,217, a decline of 27 percent.

Looked at from another perspective, the number of loans credited to the Rhode Island office of the SBA fell to 366 in fiscal 2015 from 819 in fiscal 2006.

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The picture is not a complete one, of course, but it’s likely the state would be a whole lot healthier if its businesses were taking on more debt. •

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