By Nathan Peck | MiBiz MICHIGAN — What a difference a year makes.
While uncertainty exists among bankers over whether or not Congress will approve another extension of the 90-percent guarantee and waived fees for Section 504 loans, Jane Sherzer, president of Michigan Certified Development Corp., said the credit situation has improved markedly over a year ago.
The subsidies that were part of the American Recovery and Reinvestment Act of 2009 were able to kick-start small business lending, giving the organization an opportunity to gain market share, Sherzer said. The nonprofit corporation is certified by the U.S. Small Business Administration (SBA) to partner with banks to provide SBA 504 financing throughout the state. Through May 2010, the MCDC has completed $34.7 million in loans, compared to just $18 million for the same period a year ago.
Sherzer has worked in commercial banking in Michigan since the 1980s, and joined the MCDC in 2004. While the Michigan economy suffered a significant shock in 2008, the state has survived past recessions and will rebound, said Sherzer. Sherzer recently spoke with MiBiz about the growth in MCDC’s business and how investing in staffing late in 2008 is paying off today.
MiBiz: How did the MCDC respond to the recession?
Sherzer: We certainly benefited from the recovery act, and it subsidized most of the programs we administered. In the last year, we gained market share relative to our competition. The first half of 2009 was very slow, but looking at the second half of the year, we were on record pace. That pace has continued through the first five months of 2010. Overall, I am very happy with how our business has performed the last year and a half.
MiBiz: How did you gain market share?
Sherzer: We added two new loan officers to our staff late in 2008, at the peak of the cliff. We had nearly six months (of slow performance) after we added staff, and we were not seeing the results we wanted. Strategically, we felt we were doing the right thing. In our business it is really important to be present with our bankers. A lot of things are on their mind, and we felt it was very important to be with the bankers, in front of them. Putting people on the ground has been a successful strategy for us. We have many new opportunities for expanding. For us it was sticking our necks out with staffing at a difficult time, but we knew (the economy) would come back.
MiBiz: If the 90-percent guarantees and fee waivers are allowed to expire, what will be the impact on small business lending? Sherzer: Our loan officers are still really busy. All of them have three or four loans in our 30-day pipeline. Even without the fee subsidies, it is still a great loan program. Credit has eased somewhat in Michigan. There are still challenges that banks have to deal with. They are requiring higher equity injections into property transactions of 70 percent rather than 80 percent before. While I am concerned that as these loan queues start and stop there are some borrowers that are sensitive to this, the advantages are so great that even if the fees are not subsidized, it outweighs the increased fees.
Credit has eased. (Lending) is not where it was three years ago. It is not where it was a year ago either. We see banks are willing to lend to smaller businesses. Even though credit is still tight, banks still like the idea of the risk mitigation that the SBA brings.
MiBiz: What has you concerned for the rest of the year?
Sherzer: I am watching other legislation in Congress regarding the increased loan limits and allowing the refinancing of existing debt. Our national association has been lobbying to get that passed. It is something we’re hopeful will come to fruition. A lot of businesses that are facing renewals of existing loans are struggling with getting those refinanced.
I’m optimistic about how the rest of this year looks. We are looking to add staff within the next 90 to 120 days and will be branching out into other areas as well. I’m optimistic about Michigan and businesses here.