Q: How tough it is for small businesses in the state to obtain credit right now?
A: One a scale of 1 to 10, with 10 being the hardest and 1 the easiest, I would say it is a 7.5 and it is getting harder. While the cost of capital is cheap, access to capital is difficult.
Q: Some bankers claim they are lending as much or more than in the past. Does that match what you see?
A: It is challenging times for everyone. The banks don’t know what the future holds for the economy or for any industry and a lot of small businesses want lines of credit which are unsecured.
The economy is tough right now, and a lot of small businesses didn’t plan for a rainy day. Financial advisers recommend consumers set aside six months of expenses, but how many small-business owners did that? We hear sad stories from people who didn’t think it out, who used up all of their savings, borrowed against their homes and lost them.
Q: What are some things that small businesses can do to improve their chances of obtaining credit?
A: Small-business owners need to articulate the purpose of the loans and what they need those funds for. They need to show a current, worst-case and best-case scenario. The lender needs to know business owners are thinking with visionary glasses. Could they still make the payment with a 10 percent cut in revenues? How much cushion is there? They need to be able to show how they are not a high risk to the bank.
Q: The number of SBA loans made in the past fiscal year declined but the dollar volume rose. What do you attribute that to?
A: Stronger firms looking for funds to expand received higher levels of cash, so the dollar volume was up. Smaller businesses weren’t able to access capital as easily.
Q: Typically when layoffs escalate, more people start businesses. Will that be harder to pull off in this downturn?
A: When people get laid off, they want to follow that dream. We are hoping people get smarter. The traditional model is to find a storefront and buy inventory. But have they thought about buying an existing business or partnering in one or becoming more of an investor?
Q: What new initiatives can we anticipate from the incoming administration for the SBA?
A: The SBA budget has been cut severely and employees lost. We will need to shore up personnel. The SBA will re-evaluate loan programs to make it easier for businesses to participate.
Q: Can you describe some of the efforts the SBA has launched to help small businesses survive in this difficult climate?
A: In early October we launched an economic hotline. We have published talking points on obtaining credit. We have SCORE counselors providing free advice. We are creating a small- business first-aid kit that provides ideas and things to consider in surviving tough economic times. We are hosting forums where people can sit down with a counselor who can give them an unbiased and unemotional viewpoint of their business. Next month we will be going to Grand Junction. In February it will be Greeley and Colorado Springs and Durango in March.
Edited for length and clarity from an interview by Aldo Svaldi.
