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Small Business Administration lending hits record high in Illinois for FY2005
By ALAN J. ORTBALS

   The Small Business Administration hit record lending levels in the state of Illinois in recently completed FY2005. Loans were up a whopping 74.5 percent over FY2004, according to figures supplied by Robert Esquivel, finance division chief for the Illinois District Office of the SBA. Total loan volume was up from 2,066 loans in FY2004 to 3,605 loans for fiscal year 2005.

   Esquivel attributes much of the increase to a combination of making the programs easier for lenders to use and an education campaign to change the image that some bankers have of the SBA loan programs.

   "We're always fighting the misconceptions of SBA financing," said Esquivel. "One, that there's a lot of paperwork. Two, that it takes forever. And the third, that it's too expensive to deal with."

   Because of these negative misconceptions, some bankers have shied away from using SBA programs. To try to dispel these myths, the SBA began holding bimonthly seminars and lenders forums to educate bankers on the programs and convince them of their ease of use.

   Esquivel says that the turn-around time to get approval from the SBA through the Express Loan Program is around 36 hours. However, bankers unfamiliar with the program frequently think it takes up to six months, according to Esquivel. Under the Express Loan Program, banks can lend up to $350,000.

   "Even under the regular 7a loan program, our PLP (Preferred Lenders Program) lenders get turn-around times that are equal to the Express Loan Program if not better," he said.

   Loans guaranteed under the 7a program can range up to $2 million. The preferred lender status is based on experience. Banks can achieve the designation by building up a track record for doing loans in both quality and quantity. Usually, it takes about two years to become a PLP, according to Esquivel.

   He says another thing that has helped boost loan volume is the SBA has made the programs more streamlined and easier for banks to deal with.

   "Our programs have gotten easier to use, especially with the Express Loan Program, allowing them to use their own documentation and also letting them make their own credit analysis," Esquivel said. "Before, we looked behind them and did a second review of the loan analysis. Under the PLP and Express Loan Program, they (bankers) have the unilateral authority to make those decisions."

   The idea, according to Esquivel, is to make banks more of a partner in the process and depend on their expertise in evaluating credit. "They have established credit policies and a full staff to do the lending," he said. "It's what they do best."

   The SBA regularly audits those credit policies and reviews performance before renewing a bank's PLP status.

   Another factor leading to the record-setting volume, Esquivel says, is that the SBA made some changes in the Express Loan Program, increasing the limit from $250,000 to $350,000 and opening it up to all banks - not just PLP lenders.

   Associated Bank is one of Illinois' top SBA lenders; the financial institution made $11.438 million in SBA loans in the state in FY2005. Eric Forguson is the vice president of business banking for Associated Bank; he oversees SBA loans in the Southwestern Illinois market.

   As a PLP lender, Associated can approve Express Loans in-house.

   "We actually go online and get our authorization number based on our internal approval and process the loan from there on out, so we don't even have to go directly to the SBA on the Express Loans," Forguson said. "The Express Loan Program that offers a 50 percent guarantee is great for some credits that fall just outside of conventional underwriting standards. That's a very nice way to offset risk and accommodate new borrowers or specific situations," he added.