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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jun 13, 2012

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According to Buffalo News, lending of Small Business Administration (SBA) loans has decreased in Western New York when compared to this time one year ago. This decline has occurred in the wake of expired waived fees and raised limits by the federal government.

As of the end of last month, only 200 SBA personal loans worth a total of $32.92 million have been made by lenders in the Rochester and Buffalo areas of New York. SBA loans are granted as part of the SBA’s primary 7(a) Loan Program.

Compared to this time last year, in which lenders made 584 loans worth $99.1 million, these numbers are incredibly low.

M&T Bank Corp, The largest SBA loan lender in the area, leads the way with 65 loans worth $8.31 million lent this year. However, this is a decline of 68 percent in the number of loans lent and a 78 percent decline in the amount of dollars lent. M&T is the 18th largest bank in terms of assets across the nation and is ranked sixth nationally when it comes to SBA personal loan lending.

The next five largest SBA lenders in the area also saw a decrease in the amount of SBA loans they lent.

Together, these lenders made 11 loans worth $3.78 million to exporters and 18 loans worth $2.9 million to businesses owned by military veterans.

Since the start of the year, these five lenders averaged a mere 5.8 SBA loans each.

A reason for the reduced originations is that business loans are riskier for lenders to give to new companies that have yet to develop a track record. In order to mitigate this, the SBA offers government guarantees of between 75 to 85 percent on all SBA personal loans made by private lenders. These guarantees are meant to encourage lenders to continue offering loans with the knowledge that they will be repaid if a borrower defaults.

The reason why SBA loans are so important is because they permit easier lending to small businesses which are responsible for 70 percent of new jobs and half of all private sector employees. Unfortunately, due to the recession and slow economic growth, many large banks are reluctant to extend personal loans secured by the SBA since they are still recovering from losses they incurred during the financial crisis.

In order to incentivize more lending under the oversight of the SBA, the Obama administration and Congress passed legislation in September of 2010 that authorized fee waivers, higher loan amounts and higher guarantees. However, that legislation expired September of 2011.

Before the legislation expired, these incentives directly led to an increase in lending to small businesses.