Businesses take advantage of loan extension

Rufus J. Burdette hopes the new building-supply store he is planning on Phinizy Road in Augusta will help his company become a one-stop shop.

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Jackie Ricciardi/Staff

Rufus Burdette, owner of Star One Supplies, will use a Small Business Administration loan to build a larger store on Phinizy Road.

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Jackie Ricciardi/Staff

Burdette, who is also co-owner of a construction company, wants his new store to be a one-stop facility for commercial and private builders.

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"We would like to be your builder, your contractor and your supplier," said Burdette, the president and owner of 1 1/2-year- old Star One Supplies.

The company operates out of a much smaller space it leases and the larger building -- made possible by a loan from the U.S. Small Business Administration -- will help it grow, he said.

"If we could offer our customers the materials they need in order to build that house or that commercial project, then we could be that one-stop shop," said Burdette, who also co-owns a construction company named Greene and Burdette Property Management LLC.

SBA loans soared in Georgia and South Carolina during the October to December financial quarter as more businesses sought to snap up favorable terms before they expired at the end of 2010.

Locally, the results were mixed, depending on the type of loan. In Richmond County, lending increased 21 percent to about $5.8 million across two types of SBA loans that received enhancements from the federal government's American Reinvestment and Recovery Act.

Originally, the act's sweeter terms were set to expire at the end of September, but they were extended for the remainder of 2010. That change sparked a flurry of loan activity nationally, according to the SBA. In just three months, the agency approved $10.3 billion in loan applications.

The more generous terms were also part of an attempt by the Obama administration to jump-start lending to small businesses after the Great Recession took its toll on the credit markets.

"The financial markets are still not functioning normally," said Jeff Humphreys, the director of economic forecasting at the University of Georgia. "Private-sector lending is still constrained."

Humphreys said some of the best loans are often made early in an economic recovery, and the increased lending to small businesses would have some kind of positive effect on the economy.

One set of SBA loans included in the enhanced offerings -- known as 7(a) loans -- gave 90 percent loan guarantees to lenders and eliminated fees for businesses that borrowed. Normally, those loans carry a guarantee between 75 percent and 85 percent and charge fees of 2 percent to 3 percent.

Those changes proved particularly popular. Thirteen loans worth about $3.1 million were approved during the 2010 fiscal year in Richmond County -- a 14 percent rise from 2009.

The spike was even more rapid in Columbia County, where the loans soared more than 300 percent to about $2.8 million.

But in Aiken County during the most recent fiscal quarter that ended in December, 7(a) loans fell about 62 percent to $674,000 after the loans dropped from three to two for the period.

"The higher-guarantee levels enable us to make a loan to a business that doesn't have the capital to qualify for that type of loan," said Bill Thompson, the Augusta market president for Queensborough National Bank & Trust. "It's the difference between qualifying for a loan and being declined for a loan. Assuming it's a good idea and assuming it will be a success, it's extremely helpful to a small-business person."

Loans in the SBA's 504 program were more stable because the enhancements offered weren't as sweet. Fees were dropped for purchases in the program, which mainly fund real estate and equipment acquisitions for expansions and modernization efforts.

The real attraction to 504 program loans is the low fixed-term interest rates available, said Randy Griffin, president of CSRA Business Lending, a local nonprofit company certified to handle the loan process. Those interest rates were hovering just above 5 percent for much of the end of the year on 20-year fixed rates.

Griffin said the company had one of its best months on record in December, with eight projects approved worth about $10.5 million.

During the last federal fiscal year, which ended Sept. 30, CSRA Business Lending ranked third in the South and 37th nationally in 504 loan volume, he said. That compares to average rankings of 10th in the South and 100 nationally, Griffin added.

"We still have small businesses investing when other communities have seen a definite drop off more severe than ours," he said in an e-mail. "It also attests to the management and health of our local banks and their ability to continue lending."

He said he believes the loans will continue to be popular this year because of the low interest rate financing options.