Bank Bailout Money to be Channeled to Small Businesses?

The press services are abuzz with talk out of the White house that the government may use returned bank bailout money to make funds available to small businesses. The current lending environment is almost non existent as banks lick their wounds and resist full participation in the risky but guaranteed SBA ARC loan program. According to Reuters, ten large banks returned $68 billion in taxpayer funds last month, so the Treasury has about $127 billion in uncommitted TARP funds at its disposal. The current $336 million appropriation for the ARC loan program will not go very far and small businesses are going to be looking to Washington for additional capital to keep their business open and make it through the recovery.

There seems to be agreement among experts and law makers that the small business sector is going to have to lead us out of the bad economy. Another appropriation and easier access to capital for business owners will help make that happen.

Plans for another boost to small business lending is preliminary and no measures are likely to be taken before the Fall. Check out the following articles for more details.

Obama admin mulls bailout funds for small business

White House Searches for Ways to Help Small Businesses

SBA Annual Report on Small Business Released

Every year, the Small Business Administration, Office of Advocacy releases a report on our small business economy. This report addresses the significance of small business on our economy and points out the weaknesses and opportunities in the sector. The SBA released this report early in order to foster support for this vital sector of our economy.
The 2009 edition of The Small Business Economy reviews the economic environment  and, to the extent that data are available, how small firms fared in the recessionary  economy and financial markets of 2008. Appendices provide additional data about small  businesses along with summaries of 2008 small business research from the Office of  Advocacy. For a research summary of the report, go here.

Be a Warrior, Not a Worrier

Jay Goltz is a frequent contributor to the New York Times small business section. He runs three businesses in Chicago. In this article, he encourages small business owners to pause for a little self examination in mid 2009, and urges coming out for the second half of the year with an aggressive attitude. This is also a good time to look at your plan. It may need tweaking as you prepare for 2010. If you don't have one, that is a problem. The UNF SBDC can help by critiquing your existing plan or helping you create one to serve as a blueprint for your business going forward.

Three Things to Watch as We Play Out '09

Client Grand Opening in Southside: The Learning Experience

Huxtable Education Group, a recent graduate of the Beaver Street Enterprise Center (BSEC), and a client of the SBDC, officially opened its new project, The Learning Center Child Development Center, on July 1, making it the first Learning Center franchise in Florida. This is a state of the art child care facility located on Southside Boulevard near Baymeadows Rd. Check out the video tour and you will wish you were a kid again!

South Florida Mirrors Northeast Florida's Urgent Quest for Small Business Capital

Marcia Hiroux Pounds writes in the Sun-Sentinel that there is a great deal of frustration on the part of small businesses in South Florida that banks are not lending at a time when they need it most. This pretty much mirrors what is happening in Northeast Florida as well. Borrego Springs Bank, while not participating in the SBA ARC loan program, is still doing regular SBA lending. One of our clients received a $25,000 Patriot Express loan from Borrego last week with a 90% guarantee.

The Small Business Development Center at the University of North Florida continues to help clients with ARC loan applications. Call your bank to see if they are participating. Wachovia continues to accept applications from businesses who do not have an account with them.SunTrust is rumored to be doing so as well.

Business loans: SBA programs are available, but banks hesitant to lend

Despite several federal programs, banks only lending to best customers

The Obama administration is pushing to get loans flowing again to small business, but big banks are balking, leaving many business owners frustrated.

The problem is many banks last year essentially stopped making loans guaranteed by the U.S. Small Business Administration.

"I can't expand, I can't do anything; I'm really financial crippled," said Michael Yolich, owner of a 17-year-old Pompano Beach printing business. Yolich said a loan would help him reduce his debt and revive his business.

In South Florida, Bank of America has made only 27 general purpose 7(a) SBA loans so far this year compared with 546 for the same period a year ago. Capital One has made no loans in 2009 compared with 118 for the same months in 2008. Both were once top lenders to small business.

And that's an uptick from last fall, when loans fell drastically, said John Dunn, assistant district director for the SBA in South Florida. SBA-guaranteed loans fell from 4,163 loans worth $623.7 million in fiscal year 2007 to 2,391 loans worth $503.98 million in fiscal year 2008.

"Two years ago we were the king of the mountain," he said.

The SBA, with new powers from the Obama Administration's stimulus plan, has dropped bank fees and increased its guarantees on loans, and some lenders are coming back, Dunn said. For small businesses, the agency is offering a refinancing option and a new loan aimed at reducing debt.

On June 15, the SBA kicked off its America's Recovery Capital loan program, a new loan up to $35,000 for trimming small firms' debt on high-interest credit cards and existing loans. The loans are 100 percent guaranteed by the SBA. There's only $255 million available nationwide for ARC loans and small businesses quickly began knocking on lenders' doors.

But so far, few lenders seem to be answering. At a recent Palms West Chamber of Commerce event, SunTrust, National City, Chase, Wachovia and TD Bank said they planned to participate in the ARC program. But several small businesses say their banks are telling them they're not offering the debt-reduction loans or are only giving the loans to long-term existing customers.

In the first two weeks of the ARC program, only 139 loans worth $4.6 million were made nationwide, according to the SBA. South Florida District spokeswoman Althea Harris said the good news for small business is there's plenty of money left. "Small businesses can take time to get prepared. They don't have to panic."

Mary and John Downs have operated a Dania Beach metal fabrication shop for more than 30 years. Sales have dropped 30 percent in the recession, and the Downs would like to get an ARC loan to help the business until conditions improves. "It would give us a little breathing room," Mary Downs said.

But Bank of America, where the Downs do their business banking, told her they are not participating in the debt-reduction loan.

Bank of America, which has received $45 billion from the federal government under Troubled Asset Relief and related to its acquisition of Merrill Lynch, said last week it is still reviewing the loan program. "Because of the limited scale of the program, we are evaluating whether this is the most effective way to help small business owners," said a spokeswoman for Bank of America in an e-mailed response.

A Capital One spokesman also said the lender is not participating in the ARC loan, but has other loans available for small business.

The ARC loans are too expensive for banks to implement, said Christopher Hurn, chief executive of Mercantile Capital Corp., a lender which participates in the SBA's 504 loans for purchase of real estate or equipment. "They're doing them as favors to customers."

Dunn, the SBA official, said the alternative to more bank cooperation is for many small business owners to default on their existing loans.

"The bank is getting a 100 percent guarantee. I don't understand why a bank wouldn't take a half hour to save that customer. Is it too much work to save a working family?" he said.

Some small businesses are finding help through community lenders.

Allen Borza and Clara Mateus, husband-and-wife graphic artists in Greenacres, were laid off one day in March within hours of each other. They decided to expand the side business they had started on weekends, rather than frustrate themselves trying to find new jobs in a tight market.

The couple recently snagged a $50,000 loan backed by the SBA. But they didn't get it from their bankers in South Florida. They found their seed money through Borrego Springs Bank, a Native American-owned bank in California. The bank has a commercial branch in Panama City.

For the fledgling business, called Green Group Studio, to get a loan is "pretty remarkable," said Phil Scruton, business analyst with the Small Business Development Center at Palm Beach Community College in Boca Raton. "Lenders are looking real hard at resumes and qualifications to do business."

Dunn said small businesses seeking loans need to be realistic about their business projections when they approach their bank for a loan. "If you're losing money for three years and bring in projections that you are going to break earnings records, how real is that?"

The hard truth for many small businesses in this recession is that if they can't show the banker they will rebound and be able to repay the loan, "it might be time to pull the plug," he said.

Small Business Link of the Week: SBA Online Learning

The SBA has a series of free online small business training sessions you can take at your convenience. Available courses include Starting a Business, Surviving in a Down Economy, Business Management and Financing and Accounting. You can learn about the specific courses by clicking, “About these Courses.” In general, the courses are all self-paced and should take about 30 minutes to complete. Most of the courses require a brief online registration.

These short courses make for a great primer on small business subjects, but should not be used in place of live courses which are far more thorough.

SBA Online Learning

Entrepreneurship on the Ropes?

The rate of new establishment creation per 1,000 people in the United States, 1977-2005

Scott A. Shane, professor of entrepreneurial studies at Case Western Reserve University, writes in the N.Y. Times that we may be trending down in entrepreneurship. Shane has some interesting graphs and speaks of the Wal-Mart effect (from his own 2008 book “The Illusions of Entrepreneurship”) as a reason for small business marginalization. The article is thought provoking and the comments by readers at the end of the article are from people who have great perspective. Here is the article:

Are We Becoming Less Entrepreneurial?

Client Spotlight: Gary DiStefano Jr., American Abbey Flooring & Design/Rhino Home Pro

Gary, Missy and Gary Jr., of American Abbey Carpet and Floors

How did you wind up in the carpet and flooring business?

I was in Ohio, working for a Fortune 500 company, thinking they were making money in spite of themselves. Visiting my parents over Christmas vacation one year, I talked with my Dad about expanding his 800 s.f. retail carpet store. I jumped at the opportunity to find out if I could manage a business on my own, and moved to Jacksonville in September of 1994. By 1997, American Abbey Flooring and Design had grown to over 4100 s.f. of retail space and expanded our product lines from just carpet and vinyl to include tile, hardwood, laminate, stone and window treatments. While it wasn't as easy as I thought, it certainly has been more rewarding.

What are you doing to stay afloat in a down economy?

The largest contributing factor to our survival has been our responsible money management when the economy was booming. Building up cash reserves during the good times if vital to survival during down turns. Another important thing to do, is to apply for, and build credit resources during good times. It's cliche, but true, that the only time banks will lend you money is when you don't need it. Our lines of credit have helped us many times through the years. This slowdown has been tougher than any other we have gone through though, as it has lasted longer. To survive, two things are necessary, becoming leaner and finding new revenue streams. Traditionally, residential replacement accounted for the lion's share of our earning. We have greatly expanded our commercial business, and although the profit margins are not as high, the cash flow is a big help. Although it greatly pained me to do so, we have sacrificed margins for cash flow.

You have always been in carpet and flooring. Tell us about Rhino Home Pro and what made you diversify into that product?

This came about while looking for additional revenue streams. I actually got a marketing piece in the mail about the product. After doing research, it seemed like a perfect match. Although I was not an expert on the product, I knew a lot about the areas in which the product would be installed, wood and concrete sub-floors. The product was like nothing I'd ever seen, and backed by a name known nationwide for quality and professionalism. Although the actual chemicals are different, they are made by the same company that does the Rhino truck bed liners.

The Rhino Home Pro product, called Fast Floor competes directly against epoxy floor coatings, with the advantage of being four times as strong, twice as flexible, amazingly more chemical resistant and better looking. One huge advantage is the 24 hour return to service. Instead of having to be off the floor for three to five days, the floor is totally cured and ready for use after just one day. The final nails in epoxy's coffin are that the product is thermally and UV stable. If you've ever seen an epoxy floor in a garage, you'll notice that it dulls quickly, and you can tell where the cars park because there are areas of bare concrete right where the tires sit. UV dulls epoxy, and the heat from freshly driven tiles cause it to release from the concrete. Neither of these are problems with the Rhino coatings.

Do you do commercial work?

Absolutely, we currently have several contracts with the Navy are working with several architects on getting Fast Floor specified on their commercial projects. Fast Floor is perfect for warehouses, commercial kitchens, bathrooms janitor's closets and store rooms. It's even installed on the concourses at one of Disney's baseball stadiums in Orlando. I had high hopes for this product, but it has exceeded everyone.

What is the greatest lesson you have learned in running American Abbey

You can't know everything, getting help is a sign of strength, not weakness.

What advice would you give to someone who is thinking of going into business right now.

Proper funding is vital right now, as loans are hard to come by. If you have sufficient capital though, go for it. The timing is perfect. Real estate leases are incredibly low, quality employees are readily available and there are great advertising deals being offered. If you've done your homework, have a product or service that is in demand, and have the capital, owning a small business will be more secure than working for someone else.

Gary DiStefano, American Abbey Flooring and Design

10109 Atlantic Boulevard, #2,

Jacksonville, FL 32225

904-642-7181