Federal program provides loans for small businesses

The credit crunch didn't stop Ezra Hatcher from opening a child-care business in south Augusta.

Nor did it stand in the way of Jenny Housely's plan to create a birthday party business in west Augusta.

Both obtained loan guarantees from the federal government's Small Business Administration to get their businesses started.

They are not alone. Since the American Recovery and Reinvestment Act was signed in February, SBA has supported more than $11.3 billion in lending to small businesses nationally.

Before changes made to SBA's programs by the recovery act, the federal agency saw a significant decline in business lending during the worst months of the recession in late 2008 and early 2009, the SBA reported.

The legislation increased the percentage of guarantees and reduced fees, making the programs more attractive to banks and entrepreneurs needing money, said Terri Denison, the district director of the SBA's Georgia District Office.

Since the changes, the SBA has backed $10.4 million in business loans in Richmond and Columbia counties, according to data from the SBA's Georgia district office. The agency has backed $2 million in loans in Aiken County so far this year, according to SBA's South Carolina office.

There were only four loans pending from October 2008 to March, Ms. Denison said, so the increase in activity is good news.

"I think it is the beginnings of showing the recovery," she said. "It is coming back slowly, but I think the great news is that it is coming back."

Mr. Hatcher's Heavenly Creations and Child Development on Wheeless Road opened in July, in the midst of the recession.

"Everything is going fine, I can't complain," Mr. Hatcher said. He has 13 employees now.

He worked with Queensborough National Bank & Trust to get his $255,900 business loan. Going with a loan backed by the SBA was the advice from his banker.

The SBA doesn't provide the money for the loan, but backs the loan with guarantees to the commercial lender that it will accept losses if the loan goes into default.

"That makes it possible for that lending institution to make loans to small businesses that they might not otherwise be able to make," Ms. Denison said. "In some cases, it allows for a longer term. In most cases, the borrower only needs to put in 10 percent of the project cost, a lower down payment compared to a conventional loan of 20 to 25 percent."

The recovery act bumped up the guarantee from 75 percent to 90 percent of loans.

"We educate the client because a lot of people don't know about (the loan program)," said Russ Morgan, the vice president of community banking for Regions Bank in Martinez. "It is a slam-dunk deal. It has a stigma of being slow and too much paperwork, but it is streamlined now."

Mrs. Housely would not be in business now if it were not for an SBA guarantee on her $25,000 startup loan. She opened Sorpresas Moments of Celebration on Baston Road in April. Her company holds birthday parties and pre-school fine arts classes.

"It is difficult to get money from anyone because we are a new business," Mrs. Housely said.

She has no employees, though there are mothers who assist as volunteers.

She had her business plan written three years before opening, was aware of the SBA-backed loans and worked with the Small Business Development Center in Augusta to obtain one through a Florida lender.

Mrs. Housely said she might seek another SBA loan after she's been in business a year so that she can expand and hire staffers. The loan she obtained in March was through an express program open to her because she's a military veteran.

Mr. Morgan sees a shift in banking toward the SBA-backed loans as an effort by banks to reduce their real estate lending risk.

The national volume for September was $1.9 billion, the highest one-month total since August 2007, the SBA reported.

"With half the nation's work force either working for or own- ing a small business," SBA Administrator Karen Mills said, "these dollars played a critical role in driving economic recovery across the country.

"The recovery act was critical to unlocking the market, and as a result we've helped put billions of dollars of much needed capital in the hands of small-business owners during this tough economic time, and brought more than 1,200 lenders back into SBA's loan programs."

Reach Tim Rausch at (706) 823-3352 or timothy.rausch@augustachronicle.com.