(Source: Santa Cruz Sentinel)
By Jondi Gumz, Santa Cruz Sentinel, Calif.
Aug. 16--SANTA CRUZ -- Small business owners are discouraged about seeking loans for expansion, as many of the nation's biggest banks have yet to open up the spigot for federally guaranteed loans, which closed due to the recession.
The findings were released last week by MultiFunding, a Philadelphia small business loan adviser, 11 months after the $30 billion Small Business Jobs Act was signed into law.
MultiFunding reported Bank of America and Citibank control about a fifth of all bank deposits in the U.S. but made only 0.6 percent of all U.S. Small Business Administration 7(a) loans in 2010. Bank of America is second in deposit market share in Santa Cruz County.
Wells Fargo, which has the largest market share locally, ranked fifth on MultiFunding's Lender Responsibility Index, holding 9 percent of deposits nationwide and making 6.5 percent of the SBA loans nationwide.
Chase ranked 10th, with 10.8 percent of deposits nationwide and 4 percent of SBA loans nationwide. Chase is third in Santa Cruz County marketshare.
MultiFunding's July survey of 1,200 small business owners nationwide found 18 percent applied for a loan in the past year, with 58 percent getting what they requested.
Of those that did not apply, 73 percent say they still need a loan to improve business, but more than half held off, waiting for revenues to improve, fearful of rejection and discouraged by high interest rates.
Teresa Thomae of the Small Business Development Center at Cabrillo College sees the same trend locally.
With the weak recovery, many businesses have weak cash flow, and banks that lend on cash flow may say no, she said.
The SBA guaranteed 93 loans for $25 million in the county in fiscal 2006. That dropped to 56 loans for $12 million in fiscal 2009, then rose to 68 loans for $16 million in fiscal 2010.
"It's really a difficult credit market," said Thomae, noting some large lenders have a minimum. "Small business loans are not real profitable."
She recommended business owners contact local lenders to get help with revenue projections.
Santa Cruz Community Credit Union led in volume last year followed by Santa Cruz County Bank, which made fewer but larger loans.
As of July 31, the credit union made 74 loans totaling $3.4 million, compared to 23 totaling $1.9 million a year ago.
"It's picking up," Frank Nuciforo, chief lending officer at the credit union, noting loans as small as $5,000 or $10,000 are possible.