Chattanooga firms soak up Small Business Administration loans

Chattanooga firms soak up Small Business Administration loans

January 13th, 2012 by Ellis Smith in Business Around the Region

The Chattanooga area ranked third in a statewide study of 2011 U.S. Small Business Administration lending, supporting 780 jobs through the federal program, the agency said.

Hamilton County received more than $30 million in federally backed small business loans, third behind the Memphis and Nashville regions for the fiscal year ending Sept. 30, said Walter Perry, district director for the agency.

The total amount lent by banks to Chattanooga-area businesses slipped slightly from the previous fiscal year, but the city remained ahead of rival metropolitan Knoxville, statistics showed.

Shelby County received more than $54 million, and Davidson County received $33.2 million. Knox County was fourth behind Chattanooga, bringing in $28 million in SBA-backed loans, he said.

"SBA-guaranteed loans in Chattanooga and the community are making a difference in small business economic growth," Perry said. "The number of loans was down a little bit, but the dollar amount was very similar to the prior year."

T.J. Snow Co., which manufactures welding equipment in Chattanooga, secured about $2.2 million in SBA loans to move to a new building near the airport, said David Hetzler, president of the company.

"It is a good program," he said of the loan that helped him create eight jobs. "Overall, it's less expensive than normal bank financing, and it's the same payment on the first day as it is on the last day."

Though Hamilton County's total fell $3 million in loan volume from the prior year, the total number of loans fell even more - from 61 loans to 46 total loans.

Perry attributed the fall in loan volume to higher overall loan limits, from $2 million to $5 million. He also pointed to the interruption in business activity after the April tornadoes.

During that time, SBA granted emergency relief of $3 million in Chattanooga area, including $500,000 for businesses and $2.5 million for homeowners.

Small business lending

Mike Ohlman of the Chattanooga-based Brightbridge, which helped local businesses secure about $8.5 million in capital last year, said the SBA program remains popular with banks because it removes the danger they face if the borrower defaults.

"Banks don't typically want to deal with a start-up business because of the risk, but the SBA is taking a large part of the risk off their shoulders," Ohlman said.

The federal agency usually targets loans at companies that employ fewer than 500 employees and have less than $7 million in revenue, which it says aids job creation.

Brightbridge, the No. 1 originator statewide of so-called 504 loans, says many of its deals help companies buy land, install equipment and construct buildings.

"Nationally, you're seeing loans of about a half-million dollars for these projects, our average probably runs $600,000," he said.

Over the year, Brightbridge made 25 such loans to fund projects worth $53.49 million, which is projected to create 362 jobs through the next two years, Ohlman said.

Outside of Tennessee, the SBA set an all-time record for the fiscal year, lending more than $30 billion to more than 60,000 businesses, according to administrator Karen Mills.

"Small businesses are the backbone of the economy and SBA has been there to help them rebound through difficult times over the past few years," Mills said.