Traditional SBA lending, flat in 2020, likely to pick up in 2021 - Crain's Cleveland Business

Traditional Small Business Administration lending activity was relatively flat in 2020 compared with last year, but that is likely to change in 2021 as businesses continue adjusting to a post-COVID-19 world.

The reigning leader in SBA lending in this market by an incontestable margin, though, remains Columbus-based Huntington Bank.

In the Cleveland SBA district, traditional SBA lending totaled $392 million over 1,480 loans in fiscal year 2020, or 4.8% more dollars and 1.5% more loans than 2019. Huntington provided 26% of all 7(a) activity in the district by dollars in 2020.

Traditional SBA lending comprises the core 7(a) program, through which most loans are provided, plus the 504 and microloan programs. Funds provided through the Paycheck Protection Program and Economic Injury Disaster Loans amid the coronavirus outbreak are excluded. The fiscal years ended Sept. 30.

Comparatively, there was $886 million in traditional SBA lending across Ohio in 2020 over 3,199 loans, or 2.4% fewer dollars and 8% fewer loans.

Nationally, there was more than $28 billion in traditional SBA loans made in 2020 over 49,958 loans, which amounts to a 0.65% increase in dollars lent across 15% fewer loans compared with 2019.

All combined — adding in PPP, EIDL funds and EIDL advancements with the traditional SBA products — SBA activity in 2020 amounted to more than $764 billion over 14.5 million loans nationally. That includes $24 billion provided across 364,730 loans in Ohio.

"It was a historic year for SBA's disaster program, as we approved and disbursed more than three times as many funds for the COVID-19 EIDL program ($211 billion) as we have for all disasters combined in the agency's 67-year history ($67 billion)," said James Rivera, associate administrator for SBA's Office of Disaster Assistance, in a statement. "This was also the first time in SBA history that the agency had the statutory authority to declare a pandemic and make disaster loans."

In Cleveland and Ohio overall, the biggest originator of SBA 7(a) loans is Huntington Bank, which once again is the largest SBA lender by volume in the country despite operating in just a nine-state footprint. The lender provided $488 million in total SBA 7(a) loan dollars over 3,161 loans. Nearly 46% of those dollars and 48% of the loans were in Ohio.

Huntington, the third-largest bank in the state by deposit market share and the second-largest in Northeast Ohio, also was a big player in the PPP, issuing another $6.4 billion in loans through that program.

Typical SBA lending activity tends to be countercyclical with the economy as SBA products are designed to fill gaps when more traditional credit avenues aren't available to borrowers — something that happens more in a down economy. With a good economy the past few years, conventional lending was common and credit available, which has contributed to traditional SBA activity being down to flat.

Meanwhile, there was a lull in lending activity in the second quarter, especially because of COVID-19 lockdowns that shocked the business sector. Lenders at that time were more engaged with supporting customers through the early throes of the pandemic — and working through the PPP — than underwriting new loans.

With the economy continuing to be challenged amid the health crisis, it's likely SBA lending will trend back up in 2021, said Maggie Ference, Huntington's SBA director.

"We are back in recovery, so SBA programs will be more critical than ever in terms of access to capital," Ference said. "One of the biggest reasons we use them is uncertainty. COVID is not done, and many small businesses are really just treading water."

Ference said she expects more SBA loans to be sought in the coming year for the refinancing of debt in particular.

"There will be a lot of small business focused on organic cash flow and stabilizing coming out of COVID," she said. "So we think it will be a big year (for SBA)."

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Traditional SBA lending, flat in 2020, likely to pick up in 2021 - Crain's Cleveland Business
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