Amid signs the loan market is perking up, the head of the U.S. Small Business Administration dropped into Sacramento on Tuesday to tout new "momentum" in lending to small firms trying to start or expand.
Exhibit A: Margaret Wong, president of McWong International Inc., a longtime U.S.-China exporter who specializes in energy-efficient lighting systems. Wong recently bought a 50,000-square-foot headquarters and warehouse in Natomas, using a $2.4 million SBA loan.
Standing next to a table of LED sensors and lighting components in McWong's neatly appointed warehouse, SBA Administrator Karen Mills lauded Wong as a "serial entrepreneur," who has grown her manufacturing and export business with the help of three SBA government-backed loans over the last 10 years. The company, with $100 million in overall sales revenue last year, also develops wastewater treatment systems for Chinese cities.
SBA loans, locally and nationwide, fell on hard times during the recent recession. In the past five years, they dropped by roughly half nationwide: from 110,275 loans in 2007 to 61,721 in 2011 although the dollar amount of the loans grew from $20.6 billion to $24.6 billion.
Carrie Ellinwood, SBA loan specialist in the Sacramento district office, said it's the economy that has clipped the wings of both banks and borrowers.
But some see signs that's starting to change.
"Our job is to be the wind at your back," said Mills, citing $226 million in SBA loans issued in the Sacramento area so far this year. That's better than 2009 and 2010, when SBA loans here hovered around $167 million and $192 million, respectively.
"California has been one of the stronger rebounds for SBA lending, at least for us," said George Glines, vice president of SBA lending for Sacramento-based Bank of the West, which has branches in 19 states.
In California, Glines said, the bank's SBA loans, which run from $150,000 to $15 million, were up 58 percent between 2010 and 2011, and are already up another 20 percent this year. The bank's SBA loans last year in all 19 states totaled $213 million.
"What started California's climb back was when real estate values hit bottom," said Glines. "It takes the uncertainty out of the market enough to where people are optimistic enough and willing to take some chances."
He said the loans run the gamut, from a medical professional buying a practice to a small manufacturer of aerospace or automotive parts looking to expand. Many involve real estate activity: either refinancing high-priced loans or companies buying the building they previously leased.
For McWong, her SBA 504 loan allowed her to hire five employees and to consolidate her former West Sacramento and Woodland facilities into one location.
Mills' Northern California tour also included a Walnut Creek company that installs roof mounts for solar systems.
Although SBA loans were Topic A, both Wong and Mills took the occasion to tout "insourcing," the return of jobs particularly in manufacturing to the United States from foreign countries.
"The notion that manufacturing is dead in this country is false," said Mills, whose office said U.S. manufacturers added more than 400,000 jobs in the last two years.
For years, Wong and her Chinese-fluent staff have traveled to China, where they employ several hundred assembly workers to put together energy-efficient lighting systems and components. But China's burgeoning wages, currency valuations, shipping costs and other factors have meant that manufacturing here is starting to make economic sense.
"The timing is perfect for us," said Wong. "China's costs are rising, U.S. costs are lowering."
Her company is now exploring a contract with PRIDE Industries, whose disabled workforce in Roseville could assemble a number of lighting products that are manufactured in China. "The comparisons are very encouraging we are moving forward to expand our assembly and manufacturing in Sacramento," Wong said.
For more information on U.S. Small Business Administration loans, including what they're for and eligible uses, go to www.SBA.gov