With bank lending still hard to come by, small companies seek financing alternatives
As the recession stubbornly refuses to go away, smaller companies are finding that access to traditional bank loans might not resurface in the near future, say experts. They stress that those in need of capital might have to consider other funding sources, or restructure their companies so that theyÂ’re more attractive to lending institutions, or both.
Â“You have to solve the problem,Â” says Matthew Nemerson, president and CEO of the Connecticut Technology Council, who stresses that lenders want assurances that borrowers might not be able to provide.
Â“The whole issue of access to capitalÂ” from a bankÂ’s point of view, Nemerson says, involves questions such as Â“Is your business going to grow? Am I going to get my money back?Â”
Companies that are rejected for loans might do well to conduct a self-query, Nemerson adds. Â“When companies say theyÂ’re turned down for loans, we say, Â‘Are you competitive? WhatÂ’s your story?Â’ The issue here is we have to look at this and we have to look at patterns.Â”
That seems to be a catch-22 situation for some companies, which say access to scarce capital would allow them to implement changes that would make them more competitive.
Robin Wilson, president and CEO of the Quinnipiac Chamber of Commerce, says adderall no prescription of funding access results in companies going out of business, period.
Â“ItÂ’s still a dire situation at the local level. I still see business closing up on a regular basis,Â” Wilson says. Â“Small businesses are still having a very, very difficult time.
Â“Some businesses are being told, Â‘You donÂ’t have this and you donÂ’t have that Â— and they [small businesses] say, Â‘ThatÂ’s why we need a loan.Â’
The frustration some local companies are experiencing is understandable, Wilson says.
Â“For the average small business on Main Street thatÂ’s not a chain Â— even some that are chains Â— theyÂ’re still having problems loosening those [lending] dollars.Â”
Wilson sees the economic climateÂ’s general instability as a major factor.
Â“The single biggest issue is that nobody feels confident about whatÂ’s going to happen,Â” she says. That applies across a number of contributing indicators, including lack of certainty in the stock market and the direction of government (including this yearÂ’s presidential and congressional elections), she says. Seemingly remote occurrences also influence capital decision-making, Wilson adds.
Â“Nobody knows what we can depend on. Even whatÂ’s going on in EuropeÂ” adds to the domestic sense of insecurity, she says. Â“We used to not worry about that.Â”
ThatÂ’s an issue on which Wilson and Nemerson agree.
Â“People are still uncertain about the general condition of the global economy, not only [the economy] in Connecticut,Â” Nemerson says.
But while events beyond the Western Hemisphere might affect local lending practices, it is global players that seem to have the advantage when it comes to securing capital.
Â“ThereÂ’s more money available for global manufacturers,Â” Wilson says.
Nemerson makes a similar observation.
Â“Capital is global. Capital is looking for global markets,Â” he says. Â“I donÂ’t think the issue is just in a sense regional, idiosyncratic availability of capital.Â”
Nor does Nemerson believe the issue is lack of and/or a restricted amount of capital.
Â“I think there is lots and lots of money looking for places to invest,Â” he says. Â“When businesses say, Â‘Banks wonÂ’t lend to me,Â’ nowadays I think banks are saying, Â‘I donÂ’t think your company can grow,Â’ not Â‘I donÂ’t have the money to give to anybody.Â’ Probably more often than not today banks are saying, Â‘I donÂ’t think you can grow or I donÂ’t think the industry youÂ’re in can grow at the rate [at which] I can [reasonably expect to] get back my investment.Â’Â”
Global viability is among the key elements that enter into lending decisions, says Nemerson, who believes the companies looked at most favorably are those that can Â“be part of a growing cluster or be part of the global economy.Â”
That helps decrease any perceived risk, he says, adding, Â“Different institutions have different risk profiles that theyÂ’re willing to accept.Â”
Ginne-Rae Clay, state director for the Connecticut Small Business Development Centers (SBDC), doesnÂ’t believe banks have drastically changed their lending criteria because of the recession.
Â“The banks have always been lending. ItÂ’s just the criteria they had might have been really tight,Â” she says.
That suggests that a company that might have been able to meet competitive criteria previously Â— for example, a certain credit score Â— might not be able to do so in the current climate. This could lead to the erroneous conclusion that more restrictive criteria have been implemented when in fact it is the companyÂ’s ability to meet qualifications that has changed, not the qualifications themselves.
Clay: The banks have always been lending. It's just the criteria they had might have been really tight."
Â“Anecdotal comments I have heard from a few businesses is the length of time it takes to get loans approved,Â” says Kathy Alagno, CEO of the Milford Chamber of Commerce. Â“Then if a loan is denied after waiting for a long wait time, are the types of problems that develop in the interim Â— credit issues, etc.Â”
Ginn- Rae Clay
Alissa DeJonge, director of research for the Connecticut Economic Resource Center (CERC), believes community banks are Â“much more apt to lend,Â” especially since Â“newer pots of money and more resourcesÂ” have become available through the jobs bill.
DeJonge does believe, however, that Â“Coming out of the recession, itÂ’s harder for small businesses to get loans.Â” One reason, she says, it that Â“Larger banks want to see more collateral.Â”
She says tclhis period could be transformed into an opportunity for individuals thinking about starting a new business. Those whoÂ’ve lost a job, for example, might want to redirect their energies into entrepreneurship, figuring Â“the time is right to startÂ” something new and take advantage of state initiatives and other resources, she says. Â“ItÂ’s nice order valium these resources are available.Â”
SBDC helps businesses become more qualified for capital funding, and serves as a conduit between businesses and programs designed to give them greater access to capital.
Â“WeÂ’re not just partnering a loan, weÂ’re experienced in making deals,Â” says Clay. There might be a municipal program, for example, thatÂ’s helpful for a company, she says.
Â“WeÂ’ll look at the town [in which the company is based] and check to see if there are any grants available. WeÂ’ll check to see if thereÂ’s any CDGB [Community Development Block Grant] money or money [specifically] for businesses.Â”
Â“Many state governments are providing their own capitalÂ” with programs for which the state Â— not private banks Â— assume the risk, notes Nemerson. He and others cite a number of initiatives implemented through last yearÂ’s jobs bill that make capital accessible to Connecticut businesses, as well as other available funding initiatives.
Programs such buy tramadol online no prescription the U.S. Small Business AdministrationÂ’s Patriot Express Loan Initiative, which is intended to benefit businesses owned and operated by veterans, reservists and their spouses, are among specially targeted programs that are publicly funded, Clay notes. Several experts also mentioned ConnecticutÂ’s Department of Economic & Community DevelopmentÂ’s (DECD) Small Business Express Program, for companies with 50 or less employees.
That doesnÂ’t mean that DECD, SBDC and other entities such as the Connecticut Community Investment Corp. (CTCIC) favor operating independently of private financial institutions. On the contrary, SBDC works closely with lending institutions such as commercial banks and credit unions, notes Clay.
Wilson: "It's still a dire situation at the local level. I still see business closing up on a regular basis,"
Â“WeÂ’ll always suggest that businesses talk to a bank first,Â” Clay says. For example, if a dentist wants to open a dentistÂ’s office, a commercial lender might have funds available specifically for that purpose, she notes.
If needed, Â“The help is there to help banks leverage,Â” Clay says about state lending programs.
The CTCIC, for example, merges SBA 504 Loans with funds from a bank or some other third-party lender to meet a companyÂ’s capital needs. CTCICÂ’s other lending programs include microloans and flexible capital for small businesses through Economic Development Administration Loans.
Then thereÂ’s the Connecticut Development AuthorityÂ’s Urbank loan-guarantee program. To help provide business capital, the authority has partnered with financial institutions such as Connecticut Bank & Trust, TDBank, Farmington Bank and PeopleÂ’s Bank, among others.
The above are just a few of the public lending programs available to help small businesses. While they can work together, there should be no mistake that publicly and privately sourced lenders have different operational objectives.
Â“The state is not in this to make money,Â” Clay says. Â“ItÂ’s in this to create jobs and add to the tax base.Â”
And banks, of course, want to be assured they will receive a concrete return on their investment.
Â“You have private money thatÂ’s fearful versus public money thatÂ’s fearless,Â” is how Nemerson puts it. He notes that while a private lender might outright deny a loan on the rationale that a business or capital project is too risky, state lending entities might approach the same applicant by trying to help reduce the risk.
Nemerson: "I think banks are saying, I don't think your company can grow."
The bottom line, he adds, is that in order to secure capital small businesses should find a way to make financial institutions comfortable lending to them. In the long run, he says, not only the company, but also the state will reap capital gains.
Â“We need to reduce fear,Â” which is done by Â“increasing the probability of getting return,Â” says Nemerson. Â“ThatÂ’s the conversation that makes Connecticut more competitive.
Â“The best customersÂ” for banks, he adds, Â“can increase top-line sales and be more competitive globally.Â”
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