The number of SBA loans issued to companies in Collin, Dallas, Denton and Tarrant counties increased 13% last year
Repost By Holden Wilen – Staff Writer, Dallas Business Journal | Jun 23, 2024
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Access to capital remains one of the biggest challenges facing small businesses amid heightened interest rates and economic uncertainty.
A Dallas Business Journal analysis of data from the U.S. Small Business Administration's 7(a) loan program found that the average loan amount approved in 2023 was down about 17% to $641,749.
Overall, the number of loans approved locally increased by 13% last year to 1,316, while the total dollar amount of those loans declined 5% to $844.5 million. The analysis looked at loans approved for businesses within the four core counties of the Dallas-Fort Worth Metroplex: Collin, Dallas, Denton and Tarrant.
And a closer look at lending across both of the SBA's primary lending programs, 7(a) and 504, shows the biggest banks in DFW aren't the go-to sources for small business when it comes to getting access to capital.
Live Oak Bank, a subsidiary of Wilmington, North Carolina-based Live Oak Bancshares Inc., ranked as the biggest SBA lender in the Dallas-Fort Worth metro with more than $64 million in loan volume across both the 7(a) and 504 programs The SBA's 7(a) program provides working capital, while the 504 program provides fixed-rate financing typically used for commercial real estate or equipment.
NEW DATA: Check out a list of SBA lenders in DFW, including info on loans and executives to know, by clicking on the list below, or go here.
Local SBA loan volume in 2023
Rank | Prior Rank | Bank/Website |
1 | 1 | Live Oak Banking Co. |
2 | 2 | First Internet Bank of Indiana |
3 | 3 | Greater Texas Capital Corp. |
Other top SBA lenders in DFW's core counties included First Internet Bank of Indiana, Greater Texas Capital Corp., Enterprise Bank & Trust and Huntington National Bank. Bank of America, JPMorgan Chase & Co. and Wells Fargo & Co., the three dominant banks in DFW for deposit market share, all ranked outside the top 10 for small business lending.
The combination of smaller loans and smaller lenders paints a picture of the challenging environment facing entrepreneurs as they look to grow their businesses and keep up with larger competitors.
In an April survey of small business owners by the National Federation of Independent Business, 3% of respondents reported that all their borrowing needs were not satisfied, while 28% said their credit needs were met. And 60% of owners said they were not interested in a loan.
A net 8% of owners in the NFIB survey reported their last loan was harder to get than in previous attempts.
Kirk Beason, executive vice president and SBA managing director for Dallas-based Veritex Community Bank, attributed the decline in average loan amount to some businesses, particularly those seeking loans of more than $500,000, staying on the sidelines and waiting for interest rates to go down. Conversely, he said he has seen an increase in small businesses seeking loans of $500,000 or less.
"That space is still extremely active," Beason said. "I look across the landscape in Texas ... Dallas-Fort Worth and Houston are still very strong markets, fundamentally, compared to other markets across the U.S. There's still a lot of activity in that small space and to date interest rates haven't been a deterrent because those businesses still need to grow."
Beason joined Veritex last year to lead a revamp of its SBA lending line of business. After a sluggish start to 2023, he said the bank saw a surge in the latter half of the year. Veritex finished with $64 million in total SBA loans, including those outside of DFW's four core counties, which was almost double its $38 million in loans in 2022, he said. Within core DFW, Veritex ranked No. 15 in the DBJ analysis with 10 loans for $15.75 million.
Marketing, word of mouth and the implementation of new systems and processes to get loans processed more quickly contributed to Veritex's growth, Beason said. He also said the decision by some of the bigger lenders to pull back on small business lending has opened up opportunities for banks like Veritex.
Through the first five months of 2024, Veritex closed 36 loans for $44 million, Beason said, and was on track to finish the year with between $120 million and $140 million in total volume.
"We are all in on SBA lending at Veritex," Beason said.
Comerica Bank, the largest bank headquartered in Dallas by deposits, ranked No. 20 in core DFW SBA lending with $12.78 million in volume across 24 loans. Omar Salah, executive vice president and director of small business banking, said economic conditions "have certainly influenced current lending trends, from both a supply and demand standpoint."
"Interest rates remain elevated while inflation is moderating, which continues to weigh on economic activity but overall, small businesses are finding sources of capital, though the process continues to require a strong financial profile," Salah said.
Looking ahead, both Beason and Salah said the outlook for small business lending depends largely on what the Federal Reserve decides to do with interest rates, as well as the outcome of the presidential election in November.
Small business owners "just need to know what party is in control, and then they'll adjust," Beason said. "I think businesses will start coming off the sidelines after the election. And I think the data is showing that the interest rates are finally working, that there is slowing. I think by the beginning of 2025, you'll see businesses moving forward again."
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