Jeanne A. Hulit, the newly appointed New England regional administrator for the Small Business Administration, says she’s ready to rattle the cages in Washington, D.C. in order to help small businesses in Connecticut thrive.
After eight years of “difficult” times, Hulit said in a recent interview with the Hartford Business Journal that the SBA has a renewed focus on getting small businesses in Connecticut and across New England access to capital that they desperately need.
Of course, the task won’t be easy. Hulit, who is responsible for the delivery of the agency’s financial and technical assistance and government contracting activities throughout the six New England states, takes over the position a time when SBA lending is down because of the economic downturn.
In fiscal year 2009, the SBA in Connecticut produced 576 loans for a total of $127.9 million. That was a 30 percent decline from the previous year when the SBA made $183.5 million in loans in Connecticut.
But Hulit, who has spent 25 years in banking including most recently as senior vice president for commercial lending at Citizens Bank, said there are signs of optimism, especially with a spur in loan volume in recent months.
You said the SBA has been through a “difficult” eight years. What do you mean by that?
Over the past eight years, the agency went through a reorganization that took a lot of resources out of the states and centralized them. Any reorganization is difficult, but it’s made a lot harder when you don’t put in additional funding for retraining and when you don’t have a clear sense of how you are delivering on that mission. You end up with an agency that’s demoralized and not able to deliver its services as effectively as it should. This administration is focused on reenergizing the agency to meet the expectations of its lending partners and borrowers.
What are the biggest challenges small businesses face today?
The biggest challenge everyone is facing right now clearly is the economy and responding to a rather dramatic decrease in revenue. Companies are currently rightsizing their businesses to adjust to that, and are trying to find financing to carry them through. But gaining access to capital has been very difficult for some companies. The other huge issue is the cost of health care. Health care is a systemic issue that has been around prior to the recession and if it isn’t addressed soon it will continue to be a problem after the recession ends. Small businesses typically pay 19 percent more than larger companies for the same health care coverage because of their lack of buying power.
Can you reflect on the lending climate over the past year and your outlook going forward?
Clearly we saw the credit markets freeze and lending came to grinding halt. SBA loan volume plummeted for awhile during the last year and we really went off a cliff. But the good news is we’ve seen some of that loan volume come back, thanks largely to the passage of the American Recovery and Reinvestment Act in February. The stimulus bill provided funding for the SBA to eliminate fees for some of its loans and to increase our loan guarantees up to 90 percent. As a result, we are seeing a rebounding in credit availability for small business. Over the last two or three months, we’ve seen SBA loans increase 60 percent nationwide and 96 percent in Connecticut. That’s a good trend. Some of the secondary markets for SBA loans are also returning so that is creating more liquidity.
Will there still be bumps in the road?
Those recovery act provisions that helped spur some of the recent lending will expire at the end of this year so we are unclear at this point how much that is going to affect loan volume. I think lending will continue to get a little bit better but it’s still going to be a challenge. Bank’s loan loss reserves are still increasing given the rise in delinquency rates among borrowers, so that is still a concern.
Are there any changes that you think need to be made within the SBA?
I do think we need to have a more aggressive partnership with lenders and our resource partners to make sure that small businesses are aware of the programs available to them. The nature of small business is that they are busy doing their jobs and running their companies. They oftentimes don’t have time to sit down and understand all the economic programs that are available to them through the SBA, so it is our job to make sure we get the message out there.
Any interesting trends you are seeing right now?
Today there is a heighted interest among banks to partner with the SBA because of the government guarantees and added collateral support the loans provide.
As a former lender myself, utilizing government guarantee programs wasn’t as high on my priority list as it would be today. Just a few years ago, there was a lot of competition in the market and credit was easily available so some lenders didn’t think they needed SBA programs. But since October, over 1,200 lenders nationwide that stopped using SBA products in the past have begun to offer them again.
In addition, credit unions have been getting involved with using SBA programs and doing commercial lending that they traditionally haven’t done in the past. They saw that opportunity open up after many of the commercial banks retreated from the market.
Are there any new products available to Connecticut business owners?
The SBA rolled out a new product in June called America’s Recovery Capital Loan program, which is designed to help small businesses that have an immediate financial hardship but can demonstrate viability. The temporary program offers up to $35,000 in interest-free loans to viable small businesses, which carry a 100 percent guaranty from the SBA to the lender and require no fees paid to the SBA. Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds. Repayment can extend up to five years.
