WASHINGTON — Declining creditworthiness, tightened credit by lenders and reduced demand for loans from small business borrowers has resulted in a nearly 30% drop in Small Business Administration loans during fiscal year 2008, the agency reported today.
Although SBA said it posted a record year in 2007 with nearly 100,000 loans approved, that number dropped by nearly 30% in 2008. The dollar value of those loans declined by 13%, from a combined $20.6 billion in 2007, to $17.96 billion in 2008. Average loan size increased from $142,000 in FY 2007 to $183,000 in FY 2008, according to SBA.
The volume numbers represent loans under the 7(a) guaranteed loan and the Certified Development Company, or 504, loan programs. Loans approved under 7(a) declined by 30%, from 99,606 in 2007 to 69,434 in 2008, with loan dollars falling 11%, from $14.3 billion in 2007 to $12.7 billion in 2008.
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In the 504 program, loan approvals fell by 17%, from 10,669 in 2007 to 8,883 in 2008, and loan dollars declined by 16%, from $6.3 billion in 2007 to $5.3 billion 2008.
To reverse the downturn, SBA said it is encouraging lenders to work with qualified borrowers on a case-by-case basis and defer loan payments up to three months. The agency is also working to improve the liquidity of SBA loans on the secondary market.
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