Business borrowers usually seek the best terms they can on a loan, with a bank’s health a secondary concern.
But the credit crunch has hobbled more lenient lenders and made business loans, not just mortgages, harder to find.
“People have opened their eyes to the fact that the world is a riskier place,” said Marcelle Arak, professor of finance at the University of Colorado Denver.
Denver-based Rogers Concrete Inc. is among a growing number of companies caught by a credit contraction that has spread beyond housing to commercial lending.
In March, Colorado State Bank and Trust declined to renew a $20,000 credit line and gave Rogers until the end of August to go elsewhere.
The company owed $12,000 on the line and had a $47,000 first mortgage on a building worth $160,000, said Jim Rogers, who owns the third-generation family company with his son.
The company always paid its bills on time and has plenty of collateral, Rogers said.
But the construction business is one that banks increasingly want to avoid. And like other contractors, the company’s income can fluctuate with the seasons.
“They say we don’t have enough income,” Rogers said. “What difference does it make if you pay your loan on time?”
Colorado State Bank acquired the two loans when it bought First United Bank in May 2007 after regulators told the owners of the struggling bank, which lent heavily to homebuilders, to find a buyer.
Colorado State Bank chairman and chief executive Greg Symons declined to comment specifically on Rogers’ situation. But he said the bank’s internal standards, not the tight credit market, are behind decisions to reject certain loans.
“We are in the process of making sure that what we end up with conforms with our underwriting culture,” Symons said.
First United focused more on collateral, while Colorado State Bank looks more at the sources of income available to repay a loan. When there isn’t a fit, the bank is upfront with its customers and gives them plenty of time to relocate, Symons said.
Bank credit fell at a 6 percent annualized pace in June, leaving about $150 billion less capital available for borrowers, according to a study from Goldman Sachs.
About 55 percent of banks reported tightening lending standards on commercial loans in April, compared with 30 percent in January, according to a Federal Reserve survey of senior loan officers.
Rogers said that he never realized First United was in trouble and that he now weighs a bank’s health as he shops around. The problem is that, so far, other banks aren’t offering terms and an interest rate as good as what First United provided, Rogers said.
Rogers Concrete, founded in 1920, is the oldest concrete firm in the state.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
