APRIL 9, 2010

Local SBA lending up 250 percent in first quarter

BY JUSTINE GRIFFIN Mitchell Ruizs Orlando supply company wouldnt have been able to move into a larger new warehouse if not for a Small Business Administration loan he got in mid-March. Barnes Supply Inc. which provides everything from ashtrays to pillows, carafes and toilet paper for hotels, resorts and nightclubs wanted to expand by consolidating its four separate 1,000-square-foot Central Florida warehouses into one 6,500-square-foot location at 157 Drennen Road. The problem: Its hard to get financing in a time like this lenders dont trust anyone, said Ruiz, vice president partner of Barnes Supply, which has eight employees and $2.3 million in annual revenue. However, Ruiz was able to get that larger space and offer more products to his clients after he got a $168,000 SBA loan from Mercantile Capital Corp. an option more companies soon may see as viable. On April 2, Congress extended breaks on SBA loans for another month, making the loans less risky for lenders and more affordable for borrowers. It gave a $40 million extension to boost the SBAs 7(a) and 504 loans, two of its largest programs. The SBA estimates the extension will support $1.4 billion in small business lending. Through April 30, the SBA will guarantee 90 percent of the amount of its flagship 7(a) loans, and reduce or eliminate fees on 7(a) loans and 504 loans. These breaks were first funded by $375 million in the economic stimulus bill; they now have been extended three times. As a result, SBA lending is up significantly this fiscal year, which began Oct. 1. Through March 26, the number of 7(a) loans is up 48 percent and the dollar amount of 7(a) lending is up 116 percent compared with the same period a year ago. Use of the agencys 504 loan program, which primarily finances owner-occupied real estate, also is up dramatically. The new funding also has been a boon for local businesses. During the first quarter of this year, lenders in Lake, Orange and Seminole counties gave out $21 million in enhanced SBA loans to Central Florida companies under the Recovery Act. Thats up 250 percent from the $6 million lent in the region in first-quarter 2009. No Osceola County lenders participated in either year. Orange County is leading the state in the amount of SBA loans made this year, said Ralph Ross, deputy district director of the SBA Jacksonville office. Weve definitely seen a rise, but Orange County is seeing more than we are statewide. Although the amount of loans is increasing, the average size of loans has decreased from $500,000 last year to $470,000 this year. This just reflects the lowering rates of commercial real estate out there right now, said Ross. Chris Hurn, CEO and founder of Mercantile Capital in Orlando, also has seen growing demand for SBA loans this year. During the first quarter,

Out-SpokenN Bike Shop Owner Mike Cottle

Mercantile closed 12 SBA loans for a total of $35.7 million for commercial real estate nationwide. Thats up from three SBA loans for $3.2 million it closed during fourth-quarter 2009. The demand is there, said Hurn. A lot of companies dont know theyre looking for small business loans they just want financing. Take Mike Cottle, owner and president of Out-SpokeN Bike Shop in Lake Mary. He was having trouble finding a lender to finance an expansion. After renting various locations for more than five years, he wanted to buy his own space, but it just didnt seem possible for me to go out and get the money to buy a building. However, Cottle who has seven employees and $1 million in annual revenue eventually got a $700,000 SBA loan through Mercantile in September that helped him buy 3,500 square feet of space. He opened his shop in the new location in early February. Without that loan, this space was completely untouchable to us.