January's frigid temperatures seemed to put a chill on a federal government-backed program aimed at helping small businesses grow.
Banks in the Buffalo-Rochester market originated just 31 Small Business Administration loans during the month, down about 43 percent from a year ago, according to SBA data. Since the start of the fiscal year last October, the number of loans originated was down about 9 percent from the same period a year ago, to 193.
The total dollar value of the loans, called 7(a) loans, fell in January to $6.6 million, a 36.5 percent drop from a year ago. For the first four months of the fiscal year, the total was $38.8 million, a 6 percent drop from the same period last year.
Under the program, the government provides guarantees for up to 85 percent of the principal amount of a loan. It is designed to help businesses that might otherwise have difficulty obtaining loans, by giving the banks more reassurance to lend to them.
The January results were a bit of a surprise, since the program was on the rise -- in both loans and dollars -- through the first three months of the fiscal year. Plus, the SBA on Jan. 1 eliminated fees for lenders and small businesses on loans of $150,000 or less, which was expected to bolster activity last month.
So what gives?
Franklin J. Sciortino, the SBA's district director, did not have a definitive explanation but believes last month's bad weather -- which included a blizzard -- may have impeded activity. Sciortino said he has noticed a similar trend in previous years when bad weather struck.
That negative effect may have abated, he said. "The first few days of this month, we've seen a nice uptick."
M&T Bank Corp. was the market leader through the first four months of the fiscal year, even though its loan total declined to 60 from 81 for the same period a year ago. And the dollar value of the loans was $8.1 million through four months, down 46 percent from $14.6 million a year ago. M&T noted the program got off to an unusually slow start in the current fiscal year because of the disruption from the federal government's partial shutdown in October.
While many of the participating lenders' totals were down, First Niagara Financial Group originated 40 loans from the start of the fiscal year, 17 more than it did in the same period last year. And the combined value of its loans this year leads the local pack, at $9 million.
"We are pleased with the success and growth we have already seen this year in our small-business lending," said Chris Earle, first vice president and SBA department manager for First Niagara, in a statement.
The economy is still giving off mixed signals about a full-scale recovery, but William E. Grieshober Sr., business adviser for the Small Business Development Center at SUNY Buffalo State, said new ventures can still thrive.
"It's always a good time to be starting a business, as long as you have a good business idea," Grieshober said.
Access to capital remains an issue for some small businesses. But that access can provide the breakthrough companies need in order to grow.
Rick and Trent McKenica went to M&T for financing when they decided to expand their machine shop, Edwin J. McKenica & Sons, on Clinton Street in Buffalo.
"We needed to be able to expand into bigger and brighter opportunities within our customer base," said Trent Mc- Kenica, vice president and grandson of the company founder. "In order to do that, to maintain our sales level, we were pretty much forced to make the decision whether we were going to expand now and hope that things get better and continue upwards, or if we were going to mull along and play the 'woe is me' game."
They invested $1.4 million over three years, adding equipment and space."We are stable in this economy because of how we were able to expand our sales within our existing customer base," McKenica said.
News Staff Reporter Barbara O'Brien contributed to this report.
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Original headline: SBA loan program cools down in January chill
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