How SBA Lending is Changing During the COVID-19 Pandemic

Specialty Finance Trends

I was excited and invigorated by the amount of feedback I received recently from a LinkedIn post about my First Business Bank SBA production during the COVID-19 pandemic. For all of 2020, we’ve been operating on all cylinders, helping small business clients acquire businesses and ramp up operations with Small Business Administration (SBA) loans.

Many of my contacts were glad to hear the good news that we’re helping businesses during the crisis, while others were curious about the types of deals we are doing. I thought I’d outline briefly how the bank is reviewing SBA opportunities in the midst of the current climate we find ourselves in….Keep in mind I’m talking about the SBA’s popular 7(a) loan program, not to be confused with the emergency Paycheck Protection Program (PPP) put into place for businesses during the pandemic to help pay employees.

Changing Industry Focus

SBA loans finance acquisitions, re-finance debt, and finance start-ups in a wide variety of industries. That is still the case, however, banks are a bit more selective in this current climate due to some of uncertainty that still exists. Industries that were profitable and generated significant cash flow pre- COVID-19 but had to be shut down or can’t operate at maximum capacity are tougher deals to finance in the interim. With recent spikes in COVID-19 throughout the country, it would be difficult for any bank to say with 100% confidence that an industry whose operations have been heavily impacted by COVID-19 will immediately return to historical levels. Banks also have to evaluate changing consumer behaviors and tendencies, which needs to be factored into the opportunities considered for financing.

Those behavior changes can also have positive impacts on businesses, which is best represented by the success of many e-commerce businesses that are not only surviving in this current situation, but actually thriving. The convenience and safety of ordering from home is something that people may continue doing for the foreseeable future. For that reason, First Business Bank has been able to finance a handful of e-commerce businesses over the past few months. In addition, the resulting demand for shipping goods means that anything surrounding the packaging and shipping industries are also in demand. For instance, we also have facilitated acquisition loans for package delivery routes and a commercial truck driving school during the current pandemic.

First Business Bank is an SBA-delegated Preferred Lending Partner (PLP) and part of how we earned that is our consistent history of carefully considering loans. The SBA lending program was designed to create more access to capital for small businesses, however, with the recent recession, many things are up in the air. With each SBA loan opportunity we review, we have to consider how the SBA would scrutinize our loan decision. We must substantiate why a loan to a particular business made sense at this time.

The pandemic has thrown businesses globally a major curveball, but I do have confidence that we will rebound. Americans are part of a historically innovative and entrepreneurial culture. Business applications for the United States have steadily grown since the Great Recession, and while they show a dip currently, I am confident they will rise again.

When it’s feasible, I like to do my part to make that happen. If you’re considering a business acquisition, expanding your business, or restructuring existing debt, let’s talk about how First Business Bank can accomplish your goals with an SBA loan.