Although the worst of the economic storm has finally passed, gloomy conditions are expected to linger throughout 2011. But the dim forecast hasn’t stopped opportunistic small business owners from cashing in on favorable lending conditions and using the funds to acquire struggling competitors, purchase discounted real estate or expand their global reach. In fact, conservative lenders with healthy loan portfolios have been enticing qualified borrowers with low interest rates and aggressively pursuing deals.
According to the Los Angeles office of the SBA, lenders made 1,725 loans to small businesses in Los Angeles, Ventura and Santa Barbara counties during the nine-month period that ended June 30, 2010, which was about 50 percent more than in the same period a year earlier. The dollar volume of those loans nearly doubled compared with the year-earlier period to $850.8 million.
“Lenders have a healthy appetite for quality loans,” says Sung Soo Han, executive vice president and chief loan officer for Wilshire State Bank. “Given the current lending climate, small business owners should be assertive, shop the market and take advantage of these historically low interest rates and government incentives before they expire.”
Smart Business spoke with Han about the 2011 lending climate and how small business owners can seize the opportunity to drive growth.
How will the 2011 lending climate differ from 2010?
We’re expecting the 2010 economic conditions to persist throughout 2011 and that will require lenders to minimize risk by scrutinizing loan applications and assessing a company’s profitability and business strategies. But that means qualified borrowers are hard to find, so they wield a great deal of power in the current environment. If you own a profitable small business, you’ll receive aggressive loan pricing that includes fixed rates of 4 percent to 5 percent guaranteed for five to 10 years. In addition, the Small Business Jobs and Credit Act of 2010, which was signed into law in late September, could be extended into 2011. The bill incentivizes lenders by raising the government guarantee from 75 percent to 90 percent of the loan, and encourages borrowers by raising lending ceilings from $2 million to $5 million and waiving the origination fees.
