Helping banks get to “yes” on small business loans has never been more important to America’s economic health, because it’s smaller firms that have driven our recovery, both nationally and here in Massachusetts. Most entrepreneurs will tell you that access to affordable financing and working capital is the key ingredient that allows their business to flourish and hire. It’s the job of the U.S. Small Business Administration (SBA) and our network of lending partners to make that capital available.
In Massachusetts, we’ve witnessed something remarkable happen over the past year. SBA has made it considerably easier for banks to join our network and increase their lending activity. We’ve accomplished this by zeroing out fees on loans of less than $150,000 and by allowing banks to use their own forms, documents and procedures on the SBA Express lending platform for small loans.
Since then, small-dollar business loans ($150,000 or less) have spiked here in Massachusetts, up 44 percent since last summer. Massachusetts leads the nation in approving SBA loans of less than $150,000 and loans under $50,000. And SBA’s small business lending to Massachusetts women and minority entrepreneurs is up almost 40 percent this fiscal year.
Smaller business loans are lifelines to the neighborhoods hit hardest by the recession. Four out of every five SBA loan applications from Hispanic-American and African-American entrepreneurs are for $150,000 or less. A study by the Urban Institute found that women and minorities are three to five times more likely to be approved for an SBA-backed loan than a traditional bank loan. In other words, if the SBA doesn’t get capital to these entrepreneurs, often no one will.
Before I joined President Obama’s cabinet, I was a community business banker in Los Angeles. I strongly believe that if we want to unlock the full economic potential of underserved neighborhoods, mission-driven community banks are uniquely positioned to help make it happen. Here in Massachusetts, it has been more than 130 community banks, independent banks and regional financial institutions – led by Eastern Bank, Santander Bank, Rockland Trust and Citizens Bank – that have driven record lending increases in 2014.
The government guarantee included in SBA-backed loan products offers banks a hedge against risk and should be enormously attractive to this state’s lenders. We’re determined to modernize SBA lending until it is in the DNA of the entire Massachusetts lending community. To that end, next year we will be rolling out SBA One, a new online portal that will automate the entire 7a application, reducing the time and cost for banks to work with the SBA.
When financial institutions and their government work together to share risk and counsel borrowers, new enterprises succeed and small businesses get bigger. Nike, Staples, FedEx, Ben & Jerry’s, Under Armour and Outback Steakhouse were all once small businesses, until they found an SBA lender to work with them. We’re committed to continuing our progress, knowing the next great American success story could be one “yes” away.
Maria Contreras-Sweet is SBA administrator and a member of President Obama’s cabinet.
