Set aside the nearly genetic, if somewhat justifiable, small business concerns about government paperwork, and the fact arises that we may be missing some good financing opportunities -- specifically the Small Business Administration 7(a) and 504 loans.
Of course, not every small businesses is in a borrowing mood: Balance sheets still haven't all rebounded from the Great Recession; concerns are high about how the economy will act after whoever is elected next month is elected; not every business needs to borrow, and not every entrepreneur wants to incur debt.
Not every bank makes SBA loans, either.
Still, with the right combination of banker and borrower, SBA loan packages can be interesting. The puzzle is why more local banks and borrowers don't get together.
Here are the data that perplex me:
• In the fiscal year that ended Sept. 30, nine CDCs in Illinois -- SBA-approved community development corporations that package SBA 504 loans -- participated in a 504 loan, but only three had enough volume to really matter: Springfield-based Small Business Growth Corp., which put together 169 loans with a total value of $120.5 million; Somercor 504 Inc., Chicago, 99 loans at slightly under $73 million; and Wessex 504 Corp., Northfield, 32 loans for nearly $15 million.
Put together, those nine CDCs backed 323 loans, according to SBA data, with a value of a bit more than $223 million. The number of 504 loans made in FY 2016 was up 7.6 percent over FY 2015; loan volume was up 14.9 percent. (So you know, one of my clients is a CDC.)
According to the SBA tally, 112 Illinois banks and credit unions made SBA 504 loans, but only 50 made more than one. Only six financial institutions made as many as 10.
Structurally, the SBA 504 loan is pretty simple: Borrowers put down 10 percent. The bank covers 50 percent of the loan amount with conventional financing. An SBA-approved CDC covers the remaining 40 percent.
There's always concern about SBA paperwork, of course, but borrowers I have talked with say the process is generally easy. SBA 504 loans are by design limited to dollar commitments that give many borrowers pause -- generally real estate, including buildings, and capital equipment -- and borrowers must meet specific conditions.
• The numbers are stronger for SBA 7(a) loans, which typically involve more traditional financial solutions. SBA data say 167 banks and credit unions made 1,885 SBA 7(a) loans in Illinois last year; the value of the loans was nearly $755 million. Only 36 banks made as many as ten 7(a) loans, however.
SBA 7(a) loans most often are used for short- or long-term working capital, including accounts payable, operating expenses, inventory and seasonal financing; business startups; sometimes to refinance debt; and real estate.
Details on both SBA loan programs, including specific borrower requirements, can be found at www.sba.gov -- or perhaps at your banker's office.
You might call the bank.
• © 2016 Kendall Communications Inc. Follow Jim Kendall on LinkedIn and Twitter. Write him at Jim@kendallcom.com. Listen to Jim's Business Owners' Pod Talk at www.kendallcom.com/podcast.