Small business loans drop 35% in NY

Loan volume to small businesses in New York State plummeted 35% in 2008, the U.S. Small Business Administration reported today.

The number of loans dropped to 5,077 from 7,788 in 2007, while the total dollar amount of loans issued fell 16.2% to $584.8 million in 2008 versus $697.7 million in 2007.

Tightened credit by commercial lenders, declining creditworthiness and reduced demand for loans led to the decline, the SBA said in a release.

In New York City, the biggest SBA lenders include J.P. Morgan Chase, Banco Popular and Citibank.

Nationally, SBA loans dropped 30% in 2008. The drop in loan volume followed a record year in 2007, when the SBA made nearly 100,000 loans nationwide.

SBA Acting Administrator Sandy Baruah said the SBA hopes the federal government’s $700 billion rescue plan will help re-open the flow of credit to small businesses. The bailout authorizes the Federal Deposit Insurance Corp. to expand insurance to cover all non-interest bearing accounts, which small businesses use to cover day-to-day operations.

Also, the Federal Reserve will soon become the buyer of last resort for commercial paper, which should unfreeze that market, Mr. Baruah said. Businesses rely on commercial paper for short-term financing.

Source:http://www.crainsnewyork.com/apps/pbcs.dll/article?

 

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