The Lending Tree

Uptick in business loans drives an economic revival across Michigan


Published:

(page 3 of 5)

While 2010’s results are promising, they lagthe 3,314 loans totaling $496.1 million that the SBA guaranteed in Michigan in 2007. However, some experts say it’s unclear whether the increased loan activity will translate into net growth. Another concern is whether the temporary provisions, sweet as they were, will have had the same effect on economic activity as the Cash for Clunkers vehicle scrappage program had in 2009. A 2010 study by the University of California, Berkeley and the University of Chicago concluded that Cash for Clunkers simply pulled vehicle purchases forward from the near future.

Bankers say the SBA has the right tools at the right time to juice Michigan’s economy. “[They] allow a bank to lend more than it might be able to do otherwise on the same kind of collateral,” says Greg Wernette, executive vice president and chief lending officer for Level One Bank in Farmington Hills, a community bank that made nearly $3 million in SBA 7(a) loans last year. “The 504 program allows you to advance up to 90 percent of the appraised values, whereas most banks are going to advance only 70 percent to 80 percent,” he says.

Small business loan payments are typically based on a 15- to 20-year mortgage amortization, and the loan renews every five years. SBA loans offer 10-year terms and up to 25 years amortization, which can lower payments and increase a company’s cash flow.

Some bankers say the decline in business loans during the 2008 economic recession was mainly a function of demand — that businesses that survived into 2009 were too busy trying to stay alive to think about borrowing money. One lending officer says loan applications “fell off the map.”

But the supply-side played a role, as well. While bankers may not have necessarily tightened lending standards, devalued real estate and other market mechanisms conspired to limit how much money they could offer. To the extent that small businesses were gaining steam, many entrepreneurs decided that drawing from the SBA’s well could be a smart and assessable alternative.

Alex Burkulas chose Level One Bank in Farmington Hills for an SBA loan in 2010. The president and CEO of Cygnus Systems Inc., an IT services and support company in Taylor with 25 employees, says revenue in the first quarter rose 30 percent from the same period in 2010. He forecasts an increase of 20 percent to 25 percent in the next year.

Edit Module
Edit Module Edit Module
Edit ModuleShow Tags

Related Articles

Margin For Error

Donald Trump's upset win in Michigan during the 2016 presidential election exposed polling industry problems in the state that may prove long-lasting.

2016 Auto Dealership Consumer Guide

Hockey Haven

The new $650 million Red Wings arena and entertainment district vows to dazzle Detroit.

Focus: Remote Payment

For DTE Energy, drug stores have become a fertile ground for customers who traditionally stood in long lines at their payment centers.

Top of Their Game

Now, for the second year, DBusiness honors six young lawyers as nominated by our readers and their peers.
Edit ModuleShow Tags

Most Popular

  1. Father-and-daughter Team Will Open Mie Radici Boutique Food Store in Livonia on Nov. 18
    Mie Radici, a family-owned small business featuring authentic Sicilian olive oil and balsamic...
  2. Detroit Pistons to Bring Plum Market to Detroit’s New Center
    The Detroit Pistons today announced that Farmington Hills-based Plum Market is the official food...
  3. Detroit Arena View Properties Launches Collection of Themed Overnight Rooms
    Finding opportunity in Detroit’s growing sports and entertainment markets, Detroit Arena View...
  4. Lightweight Vehicle Frame From Michigan Makes Successful Debut at SEMA Show
    The Michigan Manufacturing Technology Center in Plymouth Township has designed a lightweight...
  5. Details Announced for Winter Magic, Beacon Park Programming
    Quicken Loans and the Downtown Detroit Partnership have announced the lineup for the 2017 season...
  6. Detroit City Council Approves Brownfield Tax Credits for New High-rise Condominium Project
    The Detroit City Council today approved brownfield credits for The Ashton, a $58 million,...