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SBA lenders give small business community high marks

U.S. Small Business Administration (SBA)-approved lenders around the state say the small business sector seems to be doing very well, as loan activity continues to increase and new programs catch on.

“SBA loan volume is definitely up and activity in the small business community continues to be strong,” said Ralph Hall of Flowood-based Hall Financial Services, a retired SBA loan officer who now primarily packages SBA loans for banks. “Business activity seems to be exploding in Mississippi.”

During fiscal year 2004, the SBA approved 513 loans for Mississippi small businesses, totaling more than $134.7 million. The Mississippi 7(a) loan program accounted for 477 loans valued at almost $119.4 million, the 504 loan program for 30 loans valued at approximately $15.3 million, and six Microloans totaling $106,000. Overall, SBA’s Mississippi loan dollar volume was up slightly compared to fiscal year 2003, which totaled $132.5 million.

“The desire to start your own business continues to be strong in all areas — service, retail, contracting,” said Patricia McMahon, vice president and government loans manager for Trustmark Bank, producer of the highest number of SBA loans in the state, and the only Mississippi bank with a dedicated department for small business government-backed loans.

“In general, the small business sector is doing very well,” she said. “I haven’t seen an upward trend in delinquencies or past dues. Negative talk in the news about the economy doesn’t seem to have dissuaded that many people from becoming entrepreneurs. We probably have quite a few more loans in our portfolio without the benefit of a guaranty as our comfort level has increased with small business loans.”

Hall, who recalled the prime interest rate hovering around 22% in 1980, pointed out that “when things are going gangbusters in the economy, banks don’t use SBA-backed loans as much as when there’s some doubt in the economy. Then they want to alleviate as much risk as possible.”

The increased knowledge of borrowers before they visit the bank to apply for a small business loan is the greatest change McMahon has noticed over the last few years.

“With Internet accessibility, a greater percentage of borrowers are showing up with business plans in hand and are very familiar with the programs offered by the SBA even before we talk to them,” she said. “And that’s very helpful for us.”
Trustmark primarily makes SBA Express loans and guaranty loans backed 50% to 85% by the SBA.

“The SBA Express program has generated a lot of interest because, in the past, the SBA has had a reputation among borrowers that the application process is long and drawn out,” said McMahon. “Now they realize it’s a quick process once bank approval is received. We can process loans electronically almost the same day.”

Billy Mack Stuart, vice president of El Dorado, Ark.-based First Financial Bank in Carthage, which handles the largest dollar volume of SBA loans in the state, said business has been steady, especially for poultry industry-related loans.

“Over the last couple of years, that industry has experienced some fairly significant growth throughout the state, and I expect it to continue for the next several years,” he said.

Stuart said First Financial Bank’s typical loans average $750,000. Trustmark’s average SBA loan is closer to $75,000, said McMahon.

“We probably do about $40 million annually through the SBA,” said Stuart. “That includes strictly 7(a) SBA loans and also non-guaranty loans, as well as loans through USDA’s Farm Service Agency guaranty loan program.”

The outlook for 2005 is bright, said McMahon.

“We’re going to be out there looking for good loans and trying to help out in the small business world,” she said. “I don’t see any reason to stop.”

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com.

About Lynne W. Jeter

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