Ready money: SBA lending endures amid funding breakdowns.

• Author: Gendron, Jane
• Position: Business Trends

It took four months and hefty legwork for Robert Adams to secure a $2 million small business loan to purchase his first business, Midtown Manor. Adams is not alone--more than 2,000 applicants waited for SBA (Small Business Administration) loans last year. However, the lending game has changed.

Utah's Lending Ups and Downs

Prior to Adams' loan application in early 2009, the lending climate had become somewhat dismal. Mirroring the national economic downturn, Utah's small business lending slowed significantly in October 2008 and remained sparse until the federal stimulus package (American Recovery and Reinvestment Act) took effect in mid-February, according to Lori Chillingworth, senior vice president of business banking at Zions Bank.

"You just had too much of the unknown for everybody. The borrowers, the small businesses-no one knew for sure what to do. Everything just kind of came to a--I wouldn't say screeching halt--but a pretty dead crawl," she says.

Fortunately, for Utah's struggling small business owners, the financing faucet slowly turned in the other direction. By early September 2009, the SBA Utah District Office made more than 2,000 loans totaling approximately S270 million, according to Steve Price, deputy director of the SBA Utah District Office.

"We're off about a third from last year, but we're leading the nation as far as loans in an SBA district office," he says.

Chillingworth attributes the initial, October-to-February lending slowdown to two factors: businesses' reluctance to borrow additional money as a way of hunkering down to weather the recession and the banks' tightening of funds in reaction to the credit crunch. However, once February hit, another shift in mindset set the lending process in motion. For borrowers, it wasn't just an issue of putting off growth plans or equipment purchases, it became a matter of surviving a longer-than-anticipated economic downturn, Chillingworth explains.

"On the lenders' side, we said, 'we do have money to lend and we want to make sure we're getting it out to businesses that need it,'" she says. As of September 2009, Zions' loan volume had nearly reached summer of 2008 levels.

Picks and Processes

According to Price and Chillingworth, the most popular type of small business loan is the SBA 7(a) of which the SBA Express and ARC loans are subsets. Borrowers secure SBA loans through a lender and the SBA (a federal government entity) acts as the guarantor. The 7(a) loan, which has a...