By TED CARTER
A partial federal government shutdown that has brought Mississippi’s Small Business Administration lending to a standstill threatens a growth spurt SBA lending is having in the state.
Without a thaw in the federal freeze, the state’s SBA operation could lose an opportunity in 2019 to build on several years of loan growth that have pushed the value of loans it’s backed to over $160 million annually.
Community Bank’s Brad McGee is eager to get back to it. “We are losing valuable time,” he said.
Until the light changes, McGee and his co-workers will continue catching up on loan servicing and other responsibilities.
They will also continue to initiate new loans that will go to the SBA for review after the agency reopens. Otherwise, the SBA is out of the picture for now, said McGee, senior vice president of the $7 billion, 10-location Community Bank and head of its SBA lending.
“Pretty much the gist of everything is that any existing SBA customer or existing loans on the books, we can still service those,” he said.
But, McGee added, the “shutdown shuts down the funding of new deals from the SBA side.”
Further, any SBA-related transactions in the pipeline won’t be funded. But banks can still close on loans the SBA authorized before the shutdown, he noted. And borrowers can still apply.
“We’re doing as much of the underwriting as we can at the bank level,” McGee said.
Many of the loans wouldn’t be happening at all were it not for the SBA, according to McGee, who said the federal agency’s backing helps lower any “heartburn” attached to making the loan.
Brandon-based Community Bank made 28 SBA loans, averaging $129,450, in fiscal 2017, the last period for which loan amounts are available. The loan volume gave it a fifth-place ranking for SBA lending in Mississippi. Trustmark National Bank topped the lending list with 51 loans averaging $73,896. BankPlus followed with 48 loans that averaged $425,777, according to the SBA.
With the SBA’s popular 7 (a) lending program, the agency pledges to cover 70 percent to 80 percent of the loan if a default occurs. Even with a new requirement that the borrower put up equity of at least 10 percent, loan growth is rising by double digits. Or at least it was before the furloughing of all but a designated handful of employees starting Dec. 22.
The SBA’s Mississippi loan dollars grew by 12 percent in fiscal 2017 over fiscal 2016. It approved 405 loans through its 7(a) and 504 programs that totaled $164.7 million.
Of the loans in FY 2017, new businesses received 226 of them while 167 went to existing businesses. More banks and credit unions got involved as well, according to the SBA, which it signed up 10 new lenders in the fiscal year.
The SBA did not respond to inquiries to its Washington, D.C., headquarters. Callers to the Mississippi district office in Jackson were advised that agency workers are on furlough until further notice.
SCORE, formerly the Service Corps of Retired Executives, shares national headquarters space with the SBA. Callers to the SCORE HQ heard a message that SCORE staff and volunteers must stay out of the federally owned building until further notice. SCORE volunteers are available to mentor businesses from their homes, the message said.
The situation with SCORE is different in Mississippi. The business-assistance organization’s volunteers operate out of space provided by state or local governments or chambers of commerce, said Joe Donovan, manager of the Mississippi Development Authority’s Entrepreneur Center.
“All the chapters are still operating,” Donovan said.
It’s also business as usual at the entrepreneur assistance centers at Jackson State University and the University of Mississippi, he said.
Donovan said his state-operated center did not get a heads-up from the SBA before the start of the partial federal shutdown in late December.
As Christmas approached and a shutdown looked more likely, the SBA issued a plan of action “in the event of a lapse in appropriations.”
Staff and SBA programs and grants funded on a continuing basis, rather than yearly allocation, would remain active. Those exempted from furlough include SBA presidential appointees and staffers at the Office of Disaster Assistance
The agency asked the soon-to-be-absent workers to document the status of cases and projects so they can be resumed, transferred, or otherwise handled when the funding situation is determined.
The key order: Cease obligating the SBA in business loans.
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