Why SBA Loan Production is Down
I am a big fan of SBA loans. I’ve originated many in the last 20 years as a business broker and former commercial banker. Without these loans, my “main street” business clients would not have been able to sell their businesses to new owners or expand. We are suffering through the worst economic crisis since the Great Depression. During the Depression, interest rates were too high and no one could afford to borrow even though there was plenty of liquidity. Today the problem is different. Rates are low yet liquidity is even lower for banks. Here’s why banks aren't willing to open the credit spigot: 1) Unhealthy balance sheets. Just because a bank may have paid back TARP, it doesn’t mean the bank is “healthy”. In many cases, problem loans are not being addressed because doing so would cause write-downs which erode bank capital. The regulators know that stepping softly is key to rebuilding the economy and the banking system. Banks are encouraged to term out loans for longer