Cameron Goss, the president of Goss Suzuki of Rivergate, got a $650,000 loan late last year from the U.S. Small Business Administration to help renovate his car dealership at a cost of about $1 million.
Now that sales have dropped 30 percent, he wishes he hadn't spent the money.
"It's something that could have been put off,'' he said.
SBA loan volume has fallen across the nation and in Middle Tennessee as some businesses are putting off investments in a weak economy and as access to credit tightens.
The SBA reported loan volumes fell 30 percent in the fiscal year ended Sept. 30. And in October, overall SBA loan volumes were 50 percent lower than in October 2007, mainly because of sharp drops in the SBA Express loan program that makes smaller loans, said Eric Zarnikow, head of the SBA's Office of Capital Access.
The decline has been almost as dramatic in Middle Tennessee. SBA lending fell 23 percent to 285 loans during the fiscal year ending Sept. 30 in Davidson, Williamson, Rutherford, and Wilson and Sumner counties.
However, the dollar value of loans in Middle Tennessee actually increased by 12 percent, to $59.1 million. Those dollar values can shift dramatically year to year, based on a size of a few loans.
"SBA and banks are still doing loans, but people aren't asking for them,'' said Jonathan Grindol, the owner and president of Sunbelt Business Brokers in Nashville, which helps sell small businesses. "We have 15 to 20 guys that have stated they will put in an offer when they see what the economy does."
But others point to a variety of other factors that are putting small businesses in a bind — blocked access to credit when the economy seems most in need of investment and a spending boost.
"It's just tougher,'' said Randy Ayers, general manager of the commercial division for real estate firm Crye-Leike."SBA is absolutely tightening down." SBA guarantees loans private lenders make to small business, providing ready access to credit for companies that might otherwise have a tough time getting conventional loans.
But the same pullback happening among conventional loans is happening with SBA loans. Ayers said he has had several business deals fall apart when the buyer couldn't get an SBA loan because of stricter lending requirements. Lenders are less likely to offer loans to businesses that don't have real estate to offer as collateral, he said. Businesses that rely on discretionary income like coffee shops and those that depend on residential construction such as subcontractors are having a harder time getting loans, lenders and business consultants said.
Critics berate SBAAmong those who did get an SBA loan approved recently were Lana and Jon Robb, who opened a second Copper Kettle location two weeks ago in downtown Nashville. The original location is near Lipscomb University.
Lana Robb said the couple started the process of applying for a loan last year, and now they're a little worried about the economy.
"Would we have started this at this moment? I'm not sure. But we are a casual dining restaurant, and that seems to not be suffering right now, while fine dining is,'' she said.
Business is doing better around lunch and worse around dinner than she expected.
The big decline in SBA lending is fueling new criticism that the federal government isn't doing enough to help businesses when they are in most dire need of cash.
"SBA volume is significantly down, and one might argue that (it's happening) at a time when small business needs access to capital more than ever," said Chris Reilly, president of CIT Small Business Lending Corp. of Livingston, N.J., which ranks among the top SBA lenders nationwide.
Many SBA lenders are upset with the SBA for not taking more action to improve the situation. Tony Wilkinson, president of the National Association of Government Guaranteed Lenders in Stillwater, Okla., said problems selling the SBA loans on the secondary market are prompting some lenders to eliminate or shrink their loan-origination side of the business, waiting until the business model works again.
"We're getting frequent announcements from our members that they are exiting the program or significantly cutting staff back," he said. Last week, the group held its annual convention in Palm Springs, Calif., where many members expressed anger with the SBA for not doing more to make its lending program more appealing to lenders and accessible to borrowers. "I left there believing that we are in a crisis situation," Wilkinson said, "that we're going to have more lenders closing up shop if we don't address these issues quickly."
Quick changes urgedOther critics of the SBA say the administration hasn't done enough to ensure that business owners who sorely need access to credit now can get it and are urging some quick changes.
Tim Jochner is chief executive officer of Tennessee's largest SBA lender, finance company Superior Financial Group of Walnut Creek, Calif.
He said SBA has a cap on community express loans, small dollar loans that average $9,000 at Superior Financial. As overall loan volume drops, so does the amount of community express loans SBA allows, tightening access to loans at a time when business need it most, Jochner said.
"It's one of the few loans that a bank can do that makes financial sense,'' he said. "The need is more than ever, and we're not getting any help."
Sens. John Kerry, D.-Mass., and Charles Schumer, D.-N.Y. sent a letter recently to Sandy Baruah, the SBA's acting administrator, urging the agency to make a raft of changes to its lending programs to give temporary relief to small businesses seeking financing right now. Among the changes they recommend: granting bridge loans to small businesses through the SBA's disaster-loan program and readjusting the rate cap on 7(a) loans, the SBA's largest program, to make them more financially appealing to lenders.
They argue that the bailout package passed by Congress will take too long to trickle down to small companies.
"Small businesses can't wait any longer for a lifeboat to arrive," Sen. Kerry said in a statement. "They need help now and the SBA has the power."
Zarnikow, responding to the criticism, said the SBA has taken some steps to remedy the slowdown in SBA lending, such as allowing lenders to peg SBA loans to Libor, or London interbank offer rate, instead of the prime rate. But by the same token, he said it's natural that SBA lending would fall as demand and creditworthiness decline.
"We're not trying to replace conventional lending," he said. "We're trying to make loans to creditworthy borrowers, not to lose money on the programs."
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