Banking / Financial

It’s Back to Basics with SBA Loans

After Paycheck Protection Program lifelines, financial institutions are assisting small businesses with traditional SBA loans.

For the second straight year, New Jersey’s community banks are helping small businesses throughout the Garden State, allowing them to survive the pandemic and pay employees with federal government assistance.

Columbia, TD, Peapack-Gladstone, Lakeland and Valley are among the state’s banks that partnered with the U.S. Small Business Administration (SBA) to provide Paycheck Protection Program (PPP) loans. PPPs helped small companies struggling through the COVID-19 downturn keep paychecks going out, with the loans ultimately forgiven if key employment retention objectives have been met. 

“We pride ourselves in how we serve our local communities,’’ says Oliver Lewis, Columbia Bank’s executive vice president and head of commercial banking. “When I say our folks were working up to 18-hour days, it was because they felt sort of that burning desire to continue to service the community that they work for.’’ 

In 2021, Columbia is underwriting more than 1,600 PPP loans worth nearly $300 million, atop some 2,400 to 2,500 PPP loans in 2020 worth approximately $487 million. The bank already has helped borrowers gain forgiveness for nearly $290 million of the 2020 total. 

“I think Columbia Bank shined and I think a lot of our fellow community banks did too,’’ Lewis adds. 

At the 2020 peak, roughly 150 employees were working on nothing but PPP loans, even though Columbia’s SBA program only has three assigned staffers. 

“It was pretty much a bank-wide, team effort,’’ says Rahbar Ameri, Columbia’s senior vice president and director of small business lending. 

Pre-pandemic, SBA’s partnership with banks largely focused on a suite of staple programs known as the 7(a) and 504. The 7(a) is a virtual kitchen sink, offering small businesses capital for starting up, maintaining operations, and retaining cash to reinvest and expand. The 504 program focuses on real estate purchases and capital equipment. 

For example, SBA typically guarantees banks a 75% return on investment if a 7(a) loan fails, but temporarily upped it to 90% during the pandemic. Origination fees – which can cost thousands of dollars – have been waived through September. Borrowers also have been forgiven months of principal and interest on these loans. 

“The SBA program helps banks lend to more customers than they would under just a conventional basis,” explains Tom Pretty, TD Bank’s head of SBA lending. “On the customer side, it helps the borrowers grow their business faster, preserve their cash so that they can continue to invest in their business … and ultimately grow the New Jersey and US economies.” 

But PPP loans and their forgiveness are dominating the SBA landscape during the pandemic, amid catastrophic drop offs in a myriad of sectors and scary uncertainty. In 2021, PPPs are particularly helpful to businesses still reeling, such as restaurants, gyms and performing arts. 

TD Bank is playing a large PPP role, not only in New Jersey where it ranks as the top SBA lender, but also nationally. 

During 2020 and 2021, TD issued more than 133,000 PPP loans across 14 US states, worth a staggering $12.2 billion. New Jersey accounted for more than 36,000 of those loans, totaling more than $3.2 billion. 

For fiscal year ending Sept. 30, 2020, TD Bank in New Jersey made 308 7(a) loans worth about $50.3 million and 20 504 loans worth roughly $80.2 million. 

Activity in these programs continues to rebound in 2021, particularly with the extra incentives running through September. 

“We’re very, very busy on the 7(a) and 504 side,’’ Pretty says. “I love the SBA space because we really are helping that critical part of our economy – the small business borrower and entrepreneur.” 

For Peapack-Gladstone Bank, PPP efforts produced many first-hand, heartfelt examples of businesses and jobs saved. 

“We heard a lot of terrific stories and emails, where the borrowers came out and said, ‘If not for the PPP loan – Round 1, Round 2 – we would have shut our doors,’’’ says Andrew Glatz, Peapack-Gladstone’s senior managing director, head of SBA in the commercial banking division. 

“Here at Peapack, during the first round we saved 30,000 jobs. That was tremendous,’’ Glatz says. “We had all hands on deck. It was definitely a feel-good moment. … Many industries out there definitely benefited from it.” 

In terms of SBA conventional loans – mainly 7(a) – Peapack-Gladstone primarily in New Jersey did 40 loans worth approximately $35 million in 2019. Amid the pandemic, those numbers dropped to 28 loans worth about $26 million in 2020. 

While Peapack-Gladstone mostly focuses on SBA loans, it participates on a limited basis with the New Jersey Economic Development Authority’s program, which seeks to ensure businesses in the state have financing to expand and grow. 

“It’s a terrific program that the (EDA) has, and they do some overlap with the SBA,’’ Glatz notes. “They (EDA) concentrate on job retention and job growth programs.’’ 

At Lakeland Bank, John Rath, chief lending officer, and Pamela Frie, senior vice president, SBA lending team leader, are refocusing on traditional 7(a) loans after PPPs’ dominance in 2020 and the first half of 2021. 

“We’re on target to fund probably close to $20 million this year,’’ says Frie of the 7(a) loans. 

In 2020 and 2021, Rath reports Lakeland issued some 3,300 PPP loans totaling approximately $476 million. 

“We feel really good,’’ Rath says. “We purposefully reached out to small business and low- to moderate-income communities to make sure they were getting cared for as well.’’ 

At Valley, Chris Kneer, senior vice president, SBA lending, says his team also is getting back to the 7(a) and 504 programs after being consumed with PPP loans. 

“Valley really uses the programs to build on what we already have, which is relationships,’’ explains Kneer of the 7(a) and 504 programs for small businesses. “They’re true customers. It’s really a no-brainer for a bank like Valley.” 

In New Jersey, Valley’s current pipeline for 7(a) and 504 loans is nearly $10 million. 

For Kneer, the time for small businesses to act is now. 

“It’s probably the best time I’ve ever seen to do an SBA 7(a) loan,’’ Kneer says. “It’s just ideal for those who qualify. Everybody is hopeful about the economy. We’re seeing a lot of business acquisitions.’’ 

Meanwhile, despite the issues and frenzy associated with PPP, Kneer is among those who viewed it as essential. 

“I don’t know how the economy could have survived without PPP,” says Kneer. “There were certainly some challenging things to work through for customers and banks and everyone. With that said, the scale of it and how quickly it was put together was amazing.”

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