If you remember, the economy peaked in December of 2007 and then plunged like a rollercoaster.
SBA 7(a) loan volume foreshadowed this drop in gross domestic product.
SBA 7(a) loan approvals peaked at $15,223,526,000 for the fiscal year ending September 30, 2005.
They then dropped to $14,525,100,000 for the fiscal year ending September 30, 2006.
Approvals continued to drop over the next twelve months to $14,292,141,000.
SBA 7(a) loan approval volume continued to fall by more than 48 percent.
The drop in economic activity soon followed.
The correlation of SBA 7(a) loan approvals with our nation's economic performance appears to be quite strong.
Just for fun I calculated the correlation coefficient between SBA 7(a) loan volume and GDP for over six years using the Microsoft CORREL function. It came out to a statistically significant 0.86.
So what caused that initial drop in SBA loan volume?
The drop in SBA 7(a) loan approvals was attributed to the elimination of a small loan program – LowDoc – and more importantly an increase in the guaranty fee for SBA loans.