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Business lending guide 2012: Growing togetherSBA partnership helps banks boost lending

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A little more than a year ago, 13 banks pledged, in partnership with the U.S. Small Business Administration, to increase their small-business lending by $20 billion over three years.

Three of those banks — Wells Fargo, M&T Bank and PNC — have strong presences in the Central Pennsylvania market.

At the end of September, Karen Mills, administrator for the SBA, said the banks were already more than halfway to their goal, having increased their lending by more than $11 billion.

Jim Donovan, M&T’s market manager for business banking in Pennsylvania, said the backing of the SBA is valuable, because conventional loans don’t have the credit enhancement — the SBA guarantees a portion of the eligibility requirements. This is especially important when extending their reach to new companies or companies with a collateral shortfall.

M&T applies a threshold of $10 million in annual revenue to its small-business clients. Donovan said the Central Pennsylvania market mirrors M&T’s national numbers and that SBA-supported loans have increased more than 20 percent between 2011 and 2012.

Nationally, the bank increased small-business lending by $196 million, nearly quadrupling its 2011 pledge to boost loans by $50 million.

“PNC defines small business as any business with under $10 million in annual revenue,” said PNC spokesman Fred Solomon. He added that PNC is on track to meet its goal of increased lending to small businesses. Nationally, PNC loans increased $4.2 billion as of June 30, 2012, compared with one year ago.

By contrast, Wells Fargo defines small businesses as companies with annual revenues of less than $20 million.

“Wells Fargo is very committed to the small-business sector,” said Ralph Richard, business banking manager for Central Pennsylvania. In the first half of the year, the bank extended $7.4 billion in new net loan commitments to small businesses nationally.

Employee count is not a factor.

“It could be one- or two-person smaller business or several hundred employees,” Richard said.

According to the SBA, in 2008 there were 994,745 small businesses in the state. Of these, 233,072 were employers, accounting for 49.3 percent of private-sector jobs.

The SBA uses the North American Industry Classification System (NAICS) to define small businesses — and the definition varies greatly from industry to industry. For instance, companies with contracts and subcontracts for engineering services awarded under the National Energy

Policy Act of 1992 can have up to $35.5 million in annual revenue. But most farming, including grain and goat, is cut off at $750,000.

Companies that support activities for oil and gas operations qualify if their annual revenue is less than $7 million. Richard said Wells Fargo has seen growth in industries associated with Marcellus Shale.

Medicine is another industry that has seen growth, according to both Richard and Donovan. Donovan said that M&T has committed money to physicians’ practices, offices and equipment needs but added, “We get everything under the sun.”

Most of the companies M&T works with have $2 million to $5 million in annual revenue and 10 to 50 employees. M&T has grown its new-customer base 30 to 35 percent during the past 18 months.

Small-business lending is competitive in today’s market. Wells Fargo is “actively calling on prospective companies,” Richard said. His team of 16 people and the fact that decisions are made locally, “right here in the office,” are strengths, he said.

Wells Fargo also has an automatic “second-look” program that reviews rejected loan requests made by small businesses.

M&T also is calling on customers to “get to know what makes them tick,” Donovan said.

In Central Pennsylvania, as in the rest of the country, small businesses are considered key to economic growth and job creation. Banks recognize this and are supportive in ways large and small.

As Donovan said about M&T, banks are “only as strong as the communities in which we operate. Small businesses are our bread and butter.”

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