Entrepreneurs looking to start or expand a business can look forward to a continued surge in government-backed financing this year.
The U.S. Small Business Administration backed a record number of so-called 7(a) loans in 2014 as the economy continued to recover from the collapse of 2008. The 7(a) is the SBA’s most common loan. The agency approved 52,044 of them in the 2014 fiscal year, totaling $19.2 billion.
Getting access to funding is one of the main challenges U.S. small businesses face. But indications are that business owners will be approved for more SBA loans in 2015 than last year.
“If you look at 2014 being a high year, 2015 should be even higher,” says Mark Quinn, director of the SBA’s San Francisco District Office.
SBA loan programs
The SBA does not actually provide the money for loans itself, but it has several programs to facilitate and guarantee loans that banks and credit unions extend to small businesses.
The 7(a) loan program is aimed at helping businesses finance real estate, construction, equipment, operations and acquisitions. A more specialized loan program, known as the Certified Development Company or CDC/504 program, helps businesses fund specific purchases, including equipment and real estate.
The SBA also helps small businesses get access to microloans under $50,000, and to disaster loans to help companies recover from tornados, floods, earthquakes and other incidents.
More approvals in 2015
In the first quarter of the 2015 fiscal year — October through December 2014 — the SBA approved a combined total of 15,223 loans in the 7(a) and CDC/504 programs nationally, up from 11,954 during the previous year’s fiscal first quarter, Quinn says. The 2015 loans amount to $6.1 billion, up from $5.0 billion last year.
Quinn attributes the growth in lending to an improved economy, stronger borrower collateral, and a higher confidence in lending. He adds that both personal and business credit scores are just now reflecting improvement after being tarnished during the recession.
Mirroring the national increase in lending, Wells Fargo, the most active SBA lender in 2014, has approved 31% more SBA 7(a) loans this year than last year, equaling more than $413 million.
“As small business owners start seeing more opportunities to grow, we think they will pursue financing to expand and invest in their businesses,” Chris Ledesma, Wells Fargo’s vice president of strategy for SBA lending, said in a recent statement.
To find an SBA-approved lender near you, use the SBA search tool.
For more information about how to start and run a business, visit NerdWallet’s Small Business Guide. For free, personalized answers to questions about starting and financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.