While Citizens Bank was again the top small business lender in New England this year, both bank and Small Business Administration officials were concerned about the future, as Congress considers budget cuts to the agency, and supports only a limited increase in the allotment for SBA backed loans. Fred P. Hochberg, SBA deputy administrator, said the agency is more hopeful today with the president’s veto of the budget allocation bill than when initial proposals would have stripped the agency, reducing employment by 75 percent nationally, essentially putting it out of business. Still, Hochberg said, no one yet knows how well the agency will be funded.
Additionally he’s concerned because Congress has allotted only $9.8 billion for SBA loans, up $300 million, but far less than Hochberg said is the annual growth of such loans. Additionally, he noted that when interest rates increase, the demand for SBA backed loans also increases.
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
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“We are very concerned about this,” Hochberg said. “We are growing at a much more rapid rate than that.One out of 10 businesses in Rhode Island gets help from the SBA,” Hochberg said. Increasing the SBA budget, he said, is “central to economic development.”
Mark Formica, vice chairman of Citizens Financial Group, is also concerned.
Calling it a “fragile market,” Formica said that “if the SBA were removed from the equation, it would impact our abilities in the loan market.”
Any impact on Citizens’ ability to make loans to small businesses would be severe in New England. Citizens has far outdistanced every other lender in New England in awarding SBA backed loans and for the second consecutive year was named top New England lender by the United States Small Business Administration, funding 523 loans worth more than $40 million.
Citizens was also the leading lender in Rhode Island for the fifth year in a row approving 230 loans totaling more than $24 million. Bank officials credit much of their success to “Rhode Island’s booming economy,” and the bank’s focus on helping small business owners.
Fleet Bank was second with 79 loans at $11 billion, and First Bank and Trust Company placed third with 44 loans totaling $7 billion. BankBoston, which has merged with Fleet, was 10th with 20 loans for $3.2 million.
“Small business is the engine for growth in the state,” Formica said. “We are organized around it, and focused on it.”
Characterized by some small business owners as a “friendly people’s bank,” Citizens was also bestowed the title as number one New Market Lender for New England because of its strengths in lending to women and minorities.
“Women are starting businesses at a rate of two to one to their male counterparts,” said Patrick K. McGowan, New England regional administrator for the SBA. “They are employing more workers, and we applaud them in their effort. This is a new market in our agency, and Citizens has made strong efforts in these kinds of new markets.”
The Rhode Island SBA District office finished its fiscal year with a record number of 641 loans totaling more than $107 million, a 16 percent increase over the 1998 fiscal year and a 6.1 percent increase in its loan portfolio. The Rhode Island office surpassed the national 4 percent increase, and the 14 percent increase in New England.
“Rhode Island is really one of the strongest small business markets,” Hochberg said.
Citizens, which recently acquired UST. Corp. and a portion of State Street Corporation, is among those banks changing the lending environment in New England. Formica is confident that the Citizens’ culture and the UST history will only mean a continuation of SBA backed loans at the same or greater levels than before.
But Hochberg said he’s concerned that the Fleet-BankBoston merger will mean a reduction in some loans, a normal occurrence, he said, after bank mergers.
Neither Hochberg nor McGowan would speculate whether Sovereign Bank, which is taking over many of the divested BankBoston, Fleet branches throughout New England, would pick up some of the lost business created by the BankBoston-Fleet merger.
Formica said Citizens is committed to “pick up the pace and focus” on the small business loans. He said small business loans offer banks the opportunity to “cross sell” and allow people to do their personal banking at the institution. Formica said though lending to smaller companies often takes more creativity and experience, Citizens is committed to covering the small business market.
“There is a tremendous referral by word of mouth,” he said. “It’s all in execution. I don’t think we’ll lose a step because our game plan is pretty clear. I think we’re just scratching the surface in this business.”
