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SBA-backed lending rises to record level in Western region

Firms in the Small Business Administration region that includes California borrowed $6.7 billion in loans backed by the agency in the last fiscal year.

October 11, 2012|By Dalina Castellanos, Los Angeles Times

Small businesses in the Western region that includes California took out more U.S.-backed loans than ever during the government's last fiscal year, but they didn't spend much of it in a way that generated new jobs, analysts said.

The Small Business Administration said companies in the region, which also covers Arizona, Nevada, Hawaii and Guam, borrowed $6.7 billion in loans guaranteed by the agency. Firms in Los Angeles, Ventura and Santa Barbara counties took out loans totaling $1.5 billion, which the SBA called a "robust" amount.

"The increased lending in the region is a great indicator that we're gaining momentum and shows our economy is getting stronger on a daily basis," SBA Regional Administrator Elizabeth Echols said in San Francisco.

The record amount for the year ended Sept. 30 surpassed the region's previous high, recorded during the 2011 fiscal year when lending was boosted by the 2010 Small Business Jobs Act programs.

Nationwide, business borrowers took out SBA-backed loans totaling $30.25 billion last fiscal year, just under the record $30.5 billion borrowed in the Jobs Act-aided 2011 fiscal year.

The loans enabled the businesses to expand, buy new machinery and other equipment and renovate plants, said Patrick Rodriguez, an SBA business development specialist. Typically, small companies that can't get conventional bank loans can find financing once the SBA guarantees the loans.

"The increase of more than a quarter of a billion dollars loaned in the region should encourage more entrepreneurs and small-business owners to seek the capital they need to start, grow and succeed," Echols said. "As they do that, more and more jobs will be created."

Many business owners are taking advantage of low interest rates, but they still are holding off on large purchases in a weakened economy.

"The types of things they are spending on are smaller, such as retraining employees versus hiring new ones and making renovations to their location rather than constructing a new building," said Agata Kaczanowska, an analyst with research firm IBISWorld.

The National Federation of Independent Business said its optimism index showed that fewer owners are buying new equipment, vehicles and property.

"We're just not seeing the normal participation in those activities that we'd normally see," said NFIB analyst Holly Wade. "Quarter over quarter we're hearing that actual sales aren't improving, so expectations are fairly low. And without increased sales they won't make those purchases."

Recovery from the end of the Great Recession three years ago has been sluggish. Unemployment in California as well as the nation has remained stubbornly high, and only half the workers who lost jobs in the recession have found new work, often at lower-paying positions.

Companies are in "maintenance mode," said Sageworks analyst Libby Bierman, with owners avoiding major cash outlays as they wait for more dependable readings on the future of the economic recovery and the tax and deficit issues facing Congress.

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