Banks making more small business loans

Mark Grant, owner of Culver’s restaurant on Lake Plaza Drive in Colorado Springs, was approved for a $1.5 million SBA-backed loan through Central Bank & Trust. He plans to open his second Culver’s in Fountain by September.

Small businesses are waking from a long economic slumber — with renewed energy and plans to expand their stores, their staffs and their inventories.

Local bankers are seeing an upswing in small business loan requests, both through the U.S. Small Business Administration-backed loan program and their own small business programs.

They are working loans in amounts from $150,000 to as much as $5 million for small business owners who want to grow inventory, launch new product lines, expand shops or build second stores. In some cases, they say the loan volume is double what it was a year ago.

No one is ready to declare full economic recovery. But the movement in small business growth is a positive economic indicator, said Robin Roberts, president of Pikes Peak National Bank. Her bank is fielding more small business loan requests than last year.

“There is a level of optimism,” she said. “Businesses that have been marking time are now saying, OK, we’ve made it through the worst. It’s time to step out there and take some risk.”

By the end of the fiscal 2012 second quarter, which was March 31, banks in El Paso County had loaned $14.4 million to 42 small businesses through the SBA-backed loan program. SBA can guarantee as much as 85 percent on loans of up to $150,000 and 75 percent on loans of more than $150,000.

“We are definitely seeing a large uptick in the pipeline — loans in process and in various stages of closing,” said Jim Harris, Wells Fargo senior vice president in southern Colorado.

By the end of March, Wells Fargo had completed 13 SBA loans in El Paso County for such business owners as contractors and restaurateurs, Harris said. More loans are in process.

“Of those in the works, we are working on about $10 million in SBA loans,” Harris said. “Last year it was slower — I would say this is a 50 percent increase.”

Some small business owners are choosing now to expand their business for a variety of reasons, Harris said. Property values remain low and interest rates are at all-time lows. Some clients had put off plans to open new businesses when the economy tanked, Harris said. One client, for example, expected to open a restaurant in 2008 but halted his plans, until now.

“To some degree, he is just tired of waiting,” Harris said.

SBA does not set the interest rate on loans, only the maximum rate a bank may charge. The actual rate is negotiated between the lender and borrower.

The advantage of an SBA-backed loan for the small business owner is a lower down payment. Business owners also can take a 10-year-loan on equipment, instead of the more common five-year loan, said Tony Leveque, Central Bank & Trust executive vice president, senior business development officer.

By the end of the second quarter, Central Bank & Trust had worked two SBA-backed loans. But there are currently six SBA loans in the works, Leveque said.

“It should trickle down to employment,” he said. “I have a lot of customers adding a lot of employees in the next 12 months.”

Mark Grant, owner of Culver’s restaurant on Lake Plaza Drive, plans to hire 50 people at his second store, which will be built in Fountain this summer. He took out a $1.5 million SBA-backed loan through Central Bank & Trust and planned to close on the deal this week.

“The conditions are the best they have been for business to expand,” said Grant, who opened his first Culver’s in 2006.

Through the SBA program, he was required to put 10 percent down, instead of the 25 percent of years past, he said. The city of Fountain sweetened the deal by covering half of the down payment as part of the city’s incentive program to attract new business.

“We couldn’t pass that up,” Grant said.

Grant expects to open a 4,000-square-foot restaurant by September. Leveque said other small businesses, including doctors’ offices, are using SBA-backed loans to open second locations.

For the past couple of years the sentiment has been that small businesses didn’t have access to capital. But the state office of the National Federation of Independent Business recently reported that Colorado small businesses just weren’t asking for the loans. About 11 percent of the Colorado NFIB membership reported that access to capital is their No. 1 problem.

Another contributing factor to the amount of SBA-backed loans picking up steam, Leveque said, is that applicants are coming in with more collateral.

“A lot of businesses have done well for two or three years — the owners have worked harder to do well; they’ve watched their expenses,” Leveque said. “Now they are starting to feel confidence.”

Confidence is seeping past the existing business owner to those interested in starting their own business, said Roberts, who also volunteers at the Small Business Development Center. There are more prospective business owners seeking help to write a business plan, she said.

“We should be optimistic, based on that,” Roberts said. “Our small business community collectively is a huge employer. In a way we all win. They are getting out there and expanding, they employ people, and they make our community vibrant. Any activity we see is positive.”

SBA loans this year

In El Paso County:

15 banks participated and made

42 loans totaling $14,375,800

In Colorado:

468 loans have been made totaling $148,713,300