For three months, restaurateur Jay Akcay has been shopping for a
business loan to help him buy a building, and he’s not sure how
much longer the process will take.
Angela Tablac – St. Louis Post-Dispatch
ed****@****ic.com
ST. LOUIS, Mo.
For three months, restaurateur Jay Akcay has been shopping for a business loan to help him buy a building, and he’s not sure how much longer the process will take.
Business owner Jerry Roellchen, who makes dog-training equipment, halted his search altogether.
The frustration these entrepreneurs feel, they say, stems from a difficult lending environment for small businesses.
National data and local anecdotes indicate it has been tougher in recent months for small businesses to get bank loans, especially for owners who use their homes as collateral. And there are worries it will get worse.
In a Federal Reserve survey released last week, more than half of the banks polled in April said they tightened their lending criteria for small firms in the last three months. That’s up from January, when 30 percent of those same bankers reported stricter standards than the previous three months.
And the Small Business Administration’s most popular small-business loan is down 19 percent nationally in volume from the same time a year ago, according to agency data.
The reason for the dip is twofold: Some banks are making fewer loans, and fewer entrepreneurs are asking for them, said Dennis Melton, the SBA district director for St. Louis.
To get a loan today requires more money up-front and more paperwork, some local lenders and entrepreneurs say.
Business owners might be asked to provide higher down payments and more details on financial projections than they did before, said Steve Marsh, chairman and chief executive of Enterprise Bank & Trust in Clayton, Mo.
A year and a half ago, “you may have been able to get away with a smaller down payment,” he said.
But banks still are willing to lend today, Marsh and other bankers said.
“It is tighter, but it isn’t doomsday,” he said.
Akcay, who owned Main Street Cafe in Festus, Mo., for five years, felt the lending tightness while applying for a $175,000 loan. His building burned down in an October fire that destroyed several Festus businesses. He is now seeking a loan to buy a building in Crystal City, Mo.
But stiffer lending practices are making it difficult, he said.
Akcay said he applied for a loan at Commerce Bank, waited for two months to hear back and ultimately was denied. Since then, he contacted U.S. Bank and Bank of Bloomsdale, based in Ste. Genevieve County, Mo., and is waiting for approval from one of them.
Akcay said he provided personal and business tax returns for the last three years, financial statements and a 20-page business plan. Plus, he offered collateral.
“I’m showing the house I live in … and they’re still hesitating to say yes,” Akcay said. “It’s not like we just started the business, so there’s no reason they should say no.”
Commerce and other banks with local branches insist they haven’t changed lending requirements. But Sandy Washington of Commerce said the downturn in home values has hurt borrowers who use their houses as collateral, a common practice among small-business owners.
“With the depressed real estate market, the banks are not able to lend as much against the properties because the values have declined, not because our standards have tightened,” said Washington, a senior vice president based in St. Louis.
Real estate concerns might be the reason why Joe Jackson, owner of Jackson Pianos in St. Louis, is having trouble getting financing. He wants to pull $100,000 in equity from his building and use the money for an expansion.
Jackson said he has approached 10 banks in the past six months for a loan and has received a single response, from a national bank.
“Every time I asked (my loan agent) what was taking so long, she said it’s a bad market,” he said. Jackson said he’s waiting to be approved by the one interested lender.
Roellchen, owner of Train-Rite LLC, doesn’t want to play that waiting game.
He said he applied for a $50,000 loan through a national bank but was offered a line of credit that he didn’t want. He abandoned his loan search in March.
“It’s just because the attitude hasn’t changed for the bankers yet,” Roellchen said. “I just don’t know that it’s worth me going through this again with another bank” until things change.
Not everybody says a lending crisis has touched down in small businesses.
William Dunkelberg, who charts monthly small-business economic trends for the National Federation of Independent Business, said the percentage of owners reporting difficulties in getting credit has stayed relatively constant.
Even though large national banks offer small-business loans and some have tightened standards, “that’s hardly a credit crunch,” said Dunkelberg, the federation’s chief economist.
Owners with good track records and profits still can receive financing, said Marsh of Enterprise Bank & Trust.
“Standards are tighter, but the truth is 18 to 24 months ago, they were probably too loose,” Marsh said. “So this is a return to normal.”
