U.S. Air Force file photo

Beginning in March 2020, banks were busy juggling Covid-19 relief as Congress sent it down the pipeline. Meanwhile, they were still writing regular business loans.

The Small Business Administration’s 7(a) loans are one of the main ways that the agency supports small businesses. The loans cap out at $5 million and help entrepreneurs get their businesses off the ground, promising low interest rates and long repayment terms. The loans are designated for working capital, business expansions and purchasing new business supplies — very different from the $800 billion in Paycheck Protection Program lending.

Steve Miller, president and CEO of Fresno First Bank, said the Economic Injury Disaster Loan program, Paycheck Protection Program loans and 7(a) loans made for a busy year.

“You had your normal hiccups because the first wave of SBA really disrupted everybody in the bank,” Miller said.

Fresno First Bank’s entire SBA department and a large portion of bank staff were involved in making sure the PPP loans got out on time in the beginning of 2020.

“For us, we managed to fund the same number of loans and the same dollar amounts in 2020 as we did in 2019, so I thought for us that was pretty good,” Miller said about 7(a) loan production.

With all the distractions with Covid-19 relief, there was still good business, he said.

“Now a lot of that could have been stuff that was in the pipeline before Covid hit, so what I think will be interesting is what does your real SBA pipeline look like coming out of Covid,” Miller said.

Fresno First Bank’s performance with 7(a) loans proved impressive. According to our annual list of SBA Lenders published July 2, Fresno First Bank ranked at No. 2 for loans made in fiscal 2020. It approved $15.73 million in 7(a) loans, compared to $14.03 million in fiscal 2019.

This year, Fresno First Bank expects to do even better. The bank is currently at the same volume as 2020 at only halfway through the year.

Jim Ford, president and CEO of Central Valley Community Bank, said there was not as much interest in the 7(a) program due to the PPP and EIDL Covid-19 relief in such high demand.

Despite that, Central Valley Community Bank saw its 7(a) loan amount for fiscal 2020 increase by nearly 200% to $5.13 million, with its list ranking increasing from No. 20 to No. 6.

He expected to see more of a rebound in 2021 with the 7(a) program, but the beginning of this year included the second round of PPP. He believes it’s too early to tell whether the business climate has fully rebounded, but he remains hopeful that it’s moving in the right direction.

“My sense of the economic conditions throughout the Valley is things are progressing, people are being cautious, businesses are being cautious. And I imagine as far as startups go, people are being particularly cautious,” Ford said.

Once employment levels pick up, he believes that entrepreneurs will feel more confident reaching out for capital to start their new businesses.

Even more than 7(a) loans, Central Valley Community Bank has lent SBA 504 loans, typically for businesses that also purchase a building.

Lo Nestman, president and CEO of Premier Valley Bank, said the demand is strong for lending across the board, despite plenty of Covid-19 relief funds. Still there was a slight decline in 2020 7(a) lending compared to 2019.

“People that made it through have seemed to really succeed and really flourish during this time,” Nestman said.

SBA 504 loans have been popular as well at both Central Valley Community bank and Premier Valley Bank. Those 504 loans are structured with 50% lending from the bank, 40% through the SBA and 10% that the business comes up with.

He said mentioning business success and lending demand can’t go without mentioning the booming housing market. Fresno has been coined a “hot” housing market, and Nestman said it has a huge ripple effect, drawing business people here.

“If it becomes the hottest housing market, you’re going to draw a lot of people here. You’re going to draw a lot of talented people that want to come here that bring all those talents and skills to the Valley,” Nestman said.

Though the year has been high pressure, Nestman expects lending demand to grow strong, and to see businesses flourish.
And Miller said businesses benefit from an SBA loan during 2021 because the government will pay the principal and interest rates through October of this year.

“Some really smart people took advantage of that,” Miller said.

There are many people who have rebounded well from Covid’s business woes, and new businesses sprouting up out of the turmoil that was upon the business world during the thick of the pandemic.

“There’s been a lot of good things that have happened that have given some entrepreneurs the opportunity to start a new business,” Miller said.

The Central Valley did have advantages in economic stability throughout the pandemic — namely, its dependence on agriculture.

Banks benefit from 7(a) loans because the government guarantees 75% of the loan, and it’s a good asset to put on the books.

Covid-19 accelerated the business climate, but it doesn’t deserve all the credit, Miller said. Amazon had already been putting malls out of business, but the closure of in-person retail sped up the change.

“There’s a lot of really good businesses that could’ve started with or without Covid – because a good business idea is a good business idea,” Miller said.