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By Nathan Peck | MiBiz
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MICHIGAN—As he nears retirement at the end of the year, Small Business Administration Michigan Director Richard Temkin said he’s seen the ebbs and flows of the lending industry. Having worked at the SBA for more than 42 years, 30 of them in Michigan, Temkin’s career in the state is bookended by two of the most significant recessions in modern history.

Temkin has been director of the Michigan office since June 2002 and has helped the agency bring in new lenders and increase the number and amount of SBA loans. During 2010, the number of SBA loans made in Michigan under the 7(a) program grew 34 percent to 1,513. The dollar values of the loans grew 63 percent over fiscal 2009 to $385.8 million. Lending under the SBA’s 504 program, used for fixed assets, grew 37 percent to 208 loans in FY 2010, and the value grew 27 percent to $94.4 million.

With a little more than two months left in his tenure as director, Temkin spoke with MiBiz about the agency, the role of SBA 7(a) and 504 loan programs, and how maintaining strong ties with the lender community will pay dividends going forward.

MiBiz: What effect did the expiration of the 90 percent guarantees and fee waivers have on lending on FY 2010?

Temkin: For the fiscal year that just closed, lending was up 34 percent, and the total dollars loaned were up 54 percent compared to a year ago. A significant portion of that total is due to the Recovery act, as it increased the guarantee amount to 90 percent and waived the fees for borrowers. When it lapsed several months ago during our last fiscal year, we did see a slowdown in activity.

With the passage of the Small Business Jobs Act and Credit Act, (which extended the guarantees and waivers that had lapsed) in September, and October was the first month it was in effect, we saw a significant rebound in activity. Some of that is catch up, but we are seeing a significant increase in year-over-year activity. I expect that to continue.

MiBiz: Are the continued extensions of the loan guarantees depressing activity elsewhere on banks’ books of business?

Temkin: Participating banks sign documents that they wouldn’t be making loans under those terms. The SBA loans give a business a longer term, and thus makes the loan do-able. You can get the borrower a much smaller monthly payment. If you are a business looking for working capital, a bank is unlikely to go out more than two years. The SBA (loans) stretch that out seven years.

When you go back to the lending environment before the credit crunch, you did see banks making loans without an SBA guarantee. They wouldn’t do that today without an SBA guarantee. Lenders are taking a much more conservative approach. Deals that were done five years ago without a guarantee would not be done without one today.

As economic activity continues to come back and we continue to get further out of the recession, we will be returning to form, a normal — if that is the right term — environment. After the first of the year, I believe that the 90 percent guarantees will come to an end.

The Small Business Jobs Act increased the maximum size of loans (to $5 million, up from $2 million). We have received a number of calls that indicate a real interest in doing bigger loans from small businesses, and lenders that are looking at these greater loan amounts. As we go forward through the end of this year and into the next calendar year, we should start seeing more dollars. That should be a very positive development.
MiBiz: How has the lending environment changed during your tenure at the SBA?

Temkin: Over the years, more attention is being paid to small business and its place in the economy and economic growth.

When I moved here in 1981, everyone was turning off the lights and heading to Texas. We got through that. There was talk among the auto suppliers about the need to diversify. The auto industry came back, and all those folks were no longer looking for new markets. We moved ahead through the next two decades and got slammed two years ago.

Everyone realizes that those days are not coming back. Autos are not going to be employing the number they were back in the day. That is a significant change for Michigan.

If you look back 100 years, there was a great wave of entrepreneurial movement. Look at autos, the Fords, Chryslers or at Kellogg, the great names in economic history. What we need to do is find that next generation of those sorts of companies. They don’t have to be manufacturers necessarily, some will be, but those companies will emerge from the small business environment.

MiBiz: What are your plans for retirement?

Temkin: Nothing that involves taking a paycheck (laughs). I’ll probably volunteer and look to serve on a few boards.

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