Banks reach out to finance small business
By Marilyn Bowden
While start-ups are in general a risky proposition, local financial institutions say they are eager to lend to existing small businesses with a good track record.
"Small business is the backbone of the national economy and the local economy as well as the bank's market here," said Sam Monti, Ocean Bank's executive vice president and chief credit officer, "so we are very interested in small business lending and very active there."
Small businesses that don't meet Ocean Bank's underwriting criteria due to lack of capital or experience or collateral, he said, can be accommodated in conjunction with the Small Business Administration, or SBA.
Ocean Bank is particularly amenable to lending for business-related real estate, Mr. Monti said, such as warehouses or small office buildings; machinery and equipment; and business vehicles.
"We also have working capital lines of credit," he said, "for inventory or accounts receivables — or factoring, where we buy their receivables, for those don't have strong balance sheets but do have very strong customers."
While the start-up market is more difficult, Mr. Monti said, "we will entertain the possibility if they have a good business plan that sounds feasible and some capital and collateral. But we especially love existing businesses that need some refinancing or need to expand."
PNC Bank's most recent biannual Economic Outlook survey found an increase in loan demand in South Florida, with 23% of business owners surveyed saying they planned to take out a loan or a line of credit during the next six months and 70% planning to spend on capital investments.
"We feel good about that momentum," said South Florida Business Banking Manager Josh Folds.
He said PNC prefers a holistic approach with its corporate customers that begins with a "cash-flow conversation" before determining specific strategies, but when it comes to credit, "we focus on those with annual sales from to $1 million to $10 million."
In 2011, Mr. Folds said, PNC originated 326 SBA-backed loans totaling $100 million, about 10% of its total small business lending volume.
PNC looks at five lending criteria, he said: character, capacity, capital injection, economic conditions and collateral.
TD Bank continued to lend to small businesses throughout the recession, said South Florida Market President Ernie Diaz, and is the third largest SBA lender in the state, both in number of loans and dollar volume for deals closed.
"We are committed to the small-business segment," he said, "because we believe the role it plays is crucial in the economy as a whole and in South Florida especially."
While TD will look at any loan application, he said, "We use common sense. We understand that businesses have been through difficult times. We look at longevity of the business and the experience and commitment of the principals."
Mr. Diaz said he sees improvement in the South Florida economy as small businesses start to turn a profit.
"Short of another dip in the recession, credit is opening up," he said. "Businesses that are related to tourism are starting to do well. So are small retailers, though there's always a level of risk but there. We've done a lot of lending to family doctor practices and dental practices; the healthcare industry is thriving."
Credit unions are another financing option for small businesses, said Giulio Cordasco, member development manager for Tropical Financial Credit Union.
"The credit union traditionally offers better borrowing rates compared to banks because it is a not-for-profit organization and shares its proceeds with members by offering better rates on loans and deposits," he said. "We are the sleeping giants right now."
Tropical Financial "is beginning to do lending again," Mr. Cordasco said. "We just opened a new lending center in Kendall in the London Square shopping center at 13520 SW 120th St.
"We want to open the floodgates to small businesses, and also larger ones. We offer loan capacity up to $10 million, and also unsecured lines of credit from $10,000 to $100,000 and secured up to $250,000."
While Tropical Financial will in general look at any type of business with a two-year history, he said, hotels usually present too big a risk.
"We will look at restaurants," he said, "which many banks are not entertaining at all. We will also make equipment and vehicle loans up to 80% loan-to-value."
An often overlooked lending alternative, Mr. Cordasco said, is the business credit card. Tropical Financial offers them with up to a $45,000 credit limit.
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