June 26 (Source: By Kirsten Valle Pittman, the Charlotte Observer, NC) - Small businesses say they are seeking to develop run in trouble when they seek financing: Loans are harder to secure, and are sometimes more expensive than pre-recession. The loan is picking up in Charlotte and across the country. But it has not thawed enough to spur significant job growth and business owners and advocates say it's a drag on economic recovery.
Lenders say they want to, but deals with many companies reluctant to take on more debt. They recognize their standards are stricter in the wake of a devastating financial crisis and stricter regulations. And some say they are taking fewer risks.
A recent study found that 30 percent of small businesses that want credit would be eligible for traditional businesses and small loans guaranteed by the Administration, with lower interest rate of 8 percent. Nearly half have to turn to alternatives such as unsecured credit, which can cost up to 31 percent, according to the survey of MultiFunding, a Pennsylvania startup that helps companies find the right lender.
Charlotte Classic Graphics printing company is familiar with the hurdles. When the company needed a loan of $ 6.5 million for three new presses in 2005, owner David Pitts worked on the whole affair by email.
These days, "things I did in three weeks are 21 / 2 months to get done," he said. "While we are considerably stronger, banks and other lenders are so fickle ... if careful. "
Small businesses the power of the economy, with companies with fewer than 500 workers employ half the workforce in the private sector. Companies suffer greater job losses when the economy is in jobs, partly because of their dependence on larger businesses they serve. But when the economy gains jobs, small businesses tend to drive.
Firms with fewer than 500 employees have seen the gross employment increase on average since the recession ended 8percent, compared to 3 percent for large enterprises, data from the U.S. Bureau of Labor Statistics show.
Fueling that growth in employment is especially important these days, given the sentiment, among others, that the recovery is losing momentum. The Federal Reserve Ben Bernanke warned last week that some of the problems slowing U.S. economy, weakness in the financial sector to the housing market in trouble, could persist into next year.
And data from the new government on Friday showed the unemployment rate in Mecklenburg County is ticked up to 10.2 percent in May from 9.9 percent the previous month, as job growth and failures seekers employment of more joined the search.
"Loans and access to capital is really crucial," said Chuck Bamford, an entrepreneurship professor at Queens University of Charlotte, which predicts loans will gradually pick up in coming months. "Approach controlled means that we are not going to roar out of this recession. "
Ami Kassar MultiFunding CEO says banks should do more to help small businesses grow.
"If you're one of the lucky few who left the equity in your home, buildings, equipment, you can get some really wonderful, lending rates super-cheap," he said. "Unfortunately, if you're not one of the most in this situation, there are options, but it is quite expensive."
MultiFunding the first quarter of the study, which surveyed 250 small businesses, found 15 percent would not be eligible for funding.
It's keeping some companies to borrow money, Kassar said.
"I do not think it's due to lack of demand," he said. "It's baloney."
Waiting longer, the filter time
Classic Graphics has continued some loans this year, from $ 200 000 to over $ 1 million - and each transaction has been "like pulling teeth," says Pitts.
Securing funding means hours on the phone with lenders, more documents, more waiting, more than ever filtering.
And despite the growth of the company nearly 30 years of printing - it's on track to reach $ 50 million in sales this year, against 39 million last year - not every request is granted.
In one case, Pitts requested a loan of $ 1.2 million of equipment, but the lender to fund only $ 800,000, leaving classic graphic to pay cash for the difference.
"But it takes cash out of the business that small businesses may need to work," he said. "I can not imagine what it's like for companies not in the top of their financial game ".
The new companies and companies without much physical equipment as collateral challenges.
Five years management firm Big Sky Associates, which has almost doubled in size each year, needed to expand its line of credit to cover salaries and other operations in the gaps in corporate activity, such as contracts are finalized and billed customers, CEO Hanno Ekdahl said.
The Charlotte company, which has 10 employees and approximately $ 2 million of revenue came from its lender in late 2009, asking to increase its credit of $ 250 000 $ 75 000. Too risky, the bank said.
"It's frustrating when you feel you have a pretty good road map and then have someone say," I can not give you enough money to continue to grow your business, "said Ekdahl, that paid its employees small bonus and deferred expenditures on marketing, public relations and recruiting accordingly.
A year later, Big Sky reapplied for the credit line and managed, not without a series of face-to-face follow-up and a lot of questions about its financial position, Ekdahl said.
The SBA is pushing banks to make more loans to underserved communities and those who want small loans - and it's rise to power of his own efforts to help by introducing new programs such as a streamlined loan, officials he said.
SBA-guaranteed loans are more popular among the lenders in a down economy, because they help mitigate the risks. NC Agency District Director, Lynn Douthett said lenders are not necessarily partial to particular sectors, but noted that the SBA loans are more professional and technical services firms, as well as health care and business social assistance.
Studies suggest that others are left behind: A survey last year to Johnson C. Smith of the University, for example, showed Charlotte minority businesses are far behind their white counterparts in access to capital, rather than mobilizing personal savings, family and credit cards even.
Nationally, minority businesses have a difficult time access to capital, which made it more difficult to stay afloat during the recession, according to a report last year by the U.S. Department of Commerce Minority Business Development Agency.
These companies were found to pay higher interest rates on loans, were more likely to be denied credit and were less likely to apply for loans for fear of the application will be rejected, the report said.
What the banks say
Local bankers say they want to make loans, as they are confident in the company.
Activity is up to the Bank NewDominion Charlotte, in part due to pent-up demand by companies that have delayed the hiring of workers or buy new equipment during the recession, the CEO John Hipp said. Recent loan applicants have included accountants, consultants and construction companies, he said.
"Our pipeline, which is loans that we study is as good as it was in probably three years," he said. "I'm not saying it's tough, but compared to 2010 and perhaps 2009, it is materially better."
The bank appealed to businesses and offering special rates on loans held by their owners, who are considered less risky. But it is still carefully evaluate potential borrowers - looking, for example, whether the company has enough cash to fall back on if they lose a major customer, Hipp said.
Charlotte-based Bank of America extended 18 billion of loans to small businesses in the United States in 2010, against $ 16.5 billion in 2009. In the first quarter of this year, it lent $ 3 billion to small businesses, generally less than $ 20 million in annual revenues, including $ 75 million in North Carolina, spokeswoman Nicole Nastacie said.
Bank of America has been a top provider of SBA loans, by volume, and the company announced plans last fall to hire more than 1,000 small business bankers across the U.S. by early 2012.
A challenge, however, is that demand remains lower than before the recession, particularly among companies with less than $ 1 million in annual revenues, Nastacie said. She said that the bank does not have a ready target this year but remains committed to serving small businesses.
A Wells Fargo & Co., new loan commitments to small businesses in the U.S. increased 27 percent in the first quarter of the same period last year, Charlotte Region President Kendall Alley said. The bank, which bought Wachovia in 2008 based in Charlotte, made 31,000 loans totaling $ 3.7 billion.
Wells Fargo has been named a top SBA lender recently. Activity is up on the market of Charlotte, too, if she was still out of a third or more of pre-recession levels in the first quarter, he said.
The bank does not have a loan commitment for 2011, but he expects to make more loans this year, officials said.
"My best analogy is that it was like a train" out of the station, Alley said. "I do not think we are at full speed, but we certainly see the momentum and energy."
Small banks in the region are ready stimulant also calling on potential customers, among other efforts to stir up new business.
Charles Stewart, president of the Charlotte market for Sterling Park, said his company has seen some improvement since the end of the first quarter. Things are picking up at First Trust Charlotte, too, although "we are not ready to crack open the champagne or anything" yet, CEO Jim Bolt said.
Bamford, Professor of Queens, said there is a greater appetite for creative, interesting business ideas, such as technology, energy and health-related businesses, and less money being channeled to types of businesses that responded to the extravagance of the boom years, as party planners and other entertainment companies.
Current standards tightened lending probably will mean a longer recovery, he said. But Bamford expects to relieve banks and corporate balance sheets improve. Highest standards could also to lead to more quality businesses for the long run he told.
"Quite honestly, what is good," he said. "... What it could lead to a much stronger, longer growing season. "
Kirsten Pittman: 704-358-5248
Source: By Kirsten Valle Pittman, the Charlotte Observer, NC
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A service of YellowBrix, Inc. Publication Date: 26/06/2011
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