Tag Archives: business lending

Lisa Alberti - Small Business

Paving The Way For Phoenix Small Business Growth

Foreshadowing federal reports of an uptick in demand for commercial real estate and small business lending, CDC Small Business Finance recently funded two loans to help a local company purchase three commercial buildings in Phoenix.

We wanted to take advantage of lower property values and low financing rates to purchase the buildings,” said Todd Franklin, owner of Arizona Sun Supply, a wholesaler/distributor of solar screen products. “The additional square footage we gained will give us the space we need to warehouse all of our raw materials and give us more room to grow.”

Franklin benefited from using the Small Business Administration 504 loan program, designed to help small businesses purchase commercial real estate at below-market fixed rates and minimal down payment. The anticipated result is that small businesses expand and are able to create new jobs.

CDC Small Business Finance teamed up with Bank of America on the Arizona Sun Supply loans. CDC provided the SBA-504 fixed-rate loan to finance 40% of the total purchase, Bank of America provided 50% with a conventional loan and the small business needed only to contribute a 10% down payment. Arizona Sun Supply’s commercial real estate loans totaled just less than $1M.

Typically, small businesses are unable to tap into the long-term capital market, but can do so with a SBA 504 loan. Business owners of growing companies usually come to a crossroads of whether they should buy a facility or lease. An SBA-504 loan makes purchasing attractive because the cash down payment required by the owner is minimal, allowing the small business to preserve its cash for ongoing operations. Plus, long-term tax benefits are often realized.

Arizona Sun Supply, Inc. (AZSUN) operates as a niche supplier with a focus on specialty products that reduce the negative impact of the sun. As the top supplier of Textilene products, a durable mesh fabric made from PVC resin that is specifically designed to block the sun’s harmful rays, the company sells at wholesale prices to the general public across the U.S. In Arizona, they only work directly with sunscreen and shade structure businesses.

“The window shade business can be cyclical based on housing growth rates in the market,” Franklin said. “However, we’ve been growing at a steady rate because we continue to add new products to sell across the country and have not been reliant on sales in one or two markets.”

The primary areas of growth have been in shade fabric installed in parks, schools and other outdoor venues. Arizona Sun Supply’s general product line includes solar, screen fabrics, sliding and swinging doors, aluminum screen frames, sail and structure fabric, insect and pet screen and Textilene outdoor fabric enhanced with fire rated performance.

Over the past six months Small Business Finance has funded 21 SBA-504 loans, partnering with banks to provide $39M in financing to Arizona small businesses.

“Like Arizona Sun Supply, small businesses are taking advantage of lower property values to purchase new facilities for expansion,” said Lisa Alberti, loan officer for CDC Small Business Finance.

Alberti added that other Arizona small businesses are taking advantage of a refinance program revamped by the SBA and available through September. This program is designed to help small business owners facing balloon payments on conventional commercial property mortgages. The current refinance rate through this program is 4.95%. (For more information, http://tiny.cc/SBA504refi).

The 504-loan program was created by the SBA for the specific purpose of financing long-term fixed assets such as commercial real estate and equipment with economic life of 10 years or greater.

CDC Small Business Finance’s office is located at 2575 East Camelback Road, Suite 450. For more information, contact Lisa Alberti (602-635-8413 or lalberti@cdcloans www.cdcloans.com)

Business Lending - AZ Business Magazine November/December 2011

Now Is The Right Time For Business Lending, Financial Banking

Now is the Right Time for Business Lending, Financial Banking

Now might be the right time for businesses looking for financial backing to reach out to banks to help with plans for expansion and growth.

“When small businesses are given the tools to grow, that means growth for the economy,” says Craig P. Doyle, Arizona regional president of Comerica Bank. “We have the ability to provide capital to those businesses that can grow.”

The status of business lending in Arizona has been in question during a tough economy, but the reaction from Arizona banking representatives has been similar across the board: banks are lending, and the number of loans issued has increased over the past year.

Most banks in Arizona have weathered the economic crisis fairly well, and have had the ability to continue to make loans.

Dean Rennell, a regional president at Wells Fargo Bank says he has seen a steady improvement in business lending over the past year.

During that period Wells Fargo extended approximately $14.9 billion in loans to small businesses nationwide, a 13 percent increase over the year before.

In Arizona alone, Rennell says he has seen Wells Fargo’s lending increase 15 percent over the past year.

“Borrowers are showing improved financial performance,” Rennell says. “That means they’ve adjusted to what people are calling the ‘new normal,’ and they’ve diversified and become more efficient.”

Rennell is seeing a significant amount of loans from small businesses looking to buy competitors or real estate, or expand the company.

Companies that had cut back on expenses are now starting to invest in new equipment and technology that they had refrained from purchasing in the past.

“We’re seeing expansion requests and some businesses are taking advantage of the opportunities they see in the marketplace,” Rennell says.

Arizona banks have been able to lend during the recession because Arizona has a large number of companies that are well managed and credit-worthy, experts say.

“Most banks in Arizona are capitalized and have enough liquidity and capacity to make loans,” says Curt Hansen, executive vice president of the National Bank of Arizona. “There are a lot of well-run large and small banks, and Arizona is a good market long-term.”

When looking at possible loans, banks still desire the same qualifications they have in the past, such as a good track record, a strong management team and an ability to weather tough times.

The biggest difference now is that banks are paying more attention to the actual documents required for the loan.

“Bankers are looking at borrower’s ability to withstand short-term shocks and the borrower’s ability to repay the loans requesting,” Hansen says.

Lynne Herndon, city president at BBVA Compass, has seen an increasing number of loan requests coming from the small business segment.

“Almost 70 percent of business owners in Arizona belong to the smaller business segment, and that’s the segment where we’re seeing growth,” Herndon says. “Those entrepreneurs and business owners were cautious before and are beginning to venture out more.”

Most businesses large or small have some form of lending, whether it is a line of credit, equipment loan or real estate loan. Lines of credit are necessary for companies to continue to operate, and many companies are renewing the lines of credit they already have.

BBVA Compass Phoenix saw double-digit loan growth in 2010 of about 12 percent, and has seen about a 15 percent increase in 2011.

The only area where Herndon says he doesn’t see as many loans being issued is in real estate lending.

According to Herndon, the uncertainty in the Arizona housing market plays a huge role in the decline of real estate lending. People are still wondering if values have hit bottom.

“The economy is still a concern, and the political climate,” Herndon says. “Most of the companies and businesses here need a banking relationship in order to maintain and grow their company. The demand for loans is definitely increasing and I’m hopeful this trend will continue to improve.”

[stextbox id="info"]

For more information about business lending and financial backing, visit:

comerica.com
wellsfargo.com

nbarizona.com

bbvacompass.com

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Arizona Business Magazine November/December 2011

 

Ted and Cindy Ferkenhoff

Boefly, A New Online Marketplace, Matches Borrowers With Lenders

One couple searched unsuccessfully for six months to secure a loan. Then, 14 days after using a new online marketplace, Ted and Cindy Ferkenhoff had an offer.

The Ferkenhoffs, who needed a loan to open an AlphaGraphics franchise in Flagstaff, weren’t expecting such a quick response.

“With the lending market being pretty shaken up … it was a little surprising that they contacted us and did so, so quickly,” Ted Ferkenhoff said.

It was Mark Danford, executive vice president of the loan-consulting firm FranFund, who introduced the Ferkenhoffs’ loan request to BoeFly, the online marketplace. Danford, who has used BoeFly since its inception on March 17, 2010, decided that BoeFly was the most efficient way to connect the Ferkenhoffs to an appropriate lender.

BoeFly, which is headquartered in New York City, works much like an online dating service, but instead it matches lenders with borrowers.

“We see websites and technology efficiently matching up a whole world of people,” said Michael Rozman, executive vice president of BoeFly. “Matching up boys and girls looking for dates, down to travel and consumer mortgages. It became apparent to us that small business lending would greatly benefit from a service like ours.”

In an online marketplace setting, borrowers can submit their financing request and have almost 500 lenders see it immediately, Rozman said.

The speed at which lenders and borrowers can see results is what inspired the name BoeFly.

BOE stands for business opportunity exchange, Rozman said.

“It’s an exchange that allows businesses to connect more efficiently, and the idea of adding on the fly is a mix of how quickly transactions can fly through the system with a little bit of whimsy behind it,” he added.

It also helps professionals like Danford by saving them time. BoeFly allows him to connect “almost instantaneously” with lenders.

“It’s a night and day difference,” Rozman said.

Transactions with BoeFly are quick, but the main goal is to also make sure the appropriate lenders see the loan requests. Lenders range from small to large institutions all over the country, with six small community banks in Arizona using BoeFly. On average, a submitted loan request will see six to 12 loan offers through BoeFly, Rozman said.

Not only is BoeFly more efficient than the one-by-one approach of lending, but it can also help franchisees and small businesses owners who aren’t familiar with the lending process.

Rozman said he wants to see the word spread about BoeFly, so more small businesses can “leverage BoeFly to end up with business loans.”

The Ferkenhoffs are doing their part to inform others about their success with BoeFly.

“We have passed that around and, of course, given the feedback to AlphaGraphics,” Ferkenhoff said. “Obviously they’re looking for the best method to get new franchising funded.”

With $1.2 billion in transactions since its start, Rozman said he sees BoeFly continuing to grow as people recognize the ease of the online process.

“More and more banks realize that their clients are turning to the Web to be able to more efficiently connect with lenders,” Rozman said. “Banks historically aren’t the earliest adopters of technology, but they do when their clients lead them in that direction.”

The Ferkenhoffs are set to open their AlphaGraphics this month.

Many Arizona Small Businesses And Banks Say A Federal Loan Program Isn’t Needed - AZ Business Magazine Nov/Dec 2010

Many Arizona Small Businesses And Banks Say A Federal Loan Program Isn’t Needed

President Barack Obama has signed a bill that aims to increase small business lending. But it’s not exactly popular among Arizona’s small companies and community banks. They question whether a multibillion-dollar loan fund created by the legislation will achieve its goal.

The Small Business Jobs and Credit Act of 2010 will establish a $30 billion Small Business Lending Fund within the U.S. Treasury. The Treasury will use that money to purchase preferred shares in small- to medium-size banks that voluntarily participate in the program, injecting new capital that the banks would be encouraged to lend to small businesses. The more loans the banks make, the lower the dividend rate they pay the Treasury.

“As a small business owner, I am allergic to government intervention,” says Charlie O’Dowd, president of Westcap Solar, a Tucson company that sells and installs solar photovoltaic and solar hot-water systems. “I don’t think that this legislation is going to be any more effective than the TARP (Troubled Asset Relief Program) legislation. In this economy, it’s not that there isn’t money to be borrowed. It’s qualifying for the loan that’s the problem.”

The new law also gives John P. Lewis a bad taste in his mouth. Lewis is president and CEO of Southern Arizona Community Bank in Tucson, and a member of the FDIC’s Advisory Committee On Community Banking.

“Last January, the committee had a robust discussion (on the legislation),” Lewis says. “The committee said, ‘We don’t want to be a part of this.’ Community banks don’t need the additional capital. I have more money than I know what to do with. I need qualified borrowers.”

O’Dowd and Lewis describe a situation that is frustrating for both and that neither believes government policy will resolve. O’Dowd says small businesses’ sales are slow, impacting their ability to qualify for loans. Lewis says his loan demand is flat because there are fewer qualified borrowers.

The Arizona Small Business Association points to a wary small business community that’s in no mood to take on more debt. Earlier in the recession, small businesses tried in vain to obtain bank loans, but now they are in survival mode, says Donna Davis, the association’s CEO.

“Bank loans are not at the top of their list now,” Davis says. “Some businesses have lending fatigue. They just gave up (trying to get loans). Now they are focused on lack of sales. If sales don’t pick up, if work doesn’t pick up, they won’t seek credit. If they can boost sales and profits, then they can justify hiring and expanding.”

One outside observer sees a triumvirate of doubt that the legislation will not mitigate. Dennis Hoffman, professor of economics at Arizona State University’s W. P. Carey School of Business, says this recession has caused consumers, businesses and banks to lose their confidence. Lacking the good credit risk they saw five years ago, banks have “pulled in their oars,” Hoffman says. Creditworthy businesses fret so much over the economy, they don’t even apply for loans. Recession-scarred consumers remain stingy.

“We need to climb this wall of worry to get out of this morass,” Hoffman says. “This is a market-based, private-sector issue that will have to work itself out.”

Gail Grace, president and CEO of Sunrise Bank of Arizona headquartered in Phoenix, doesn’t sense much support for the legislation among Arizona’s banks, and wonders how many community banks would be able to participate.

“Community banks in Arizona are stressed and many may not even qualify for this program,” Grace says. “You will still have to have a fairly healthy bank to qualify for this.”

Not everyone has a dim view of the law. Robert Blaney, Arizona’s Small Business Administration district director, notes that the law will increase the SBA’s loan guarantee from 75 percent to 90 percent, easing banks’ risk on those loans. The law also will lower fees and raise the SBA’s maximum loan amount from $2 million to $5 million. There are thousands of small business owners nationwide that were waiting for the lending bill to become law, Blaney says.

One of those is Benefits By Design, a Tempe company that sets up health benefit plans for small businesses. The company’s president, Kristine Kassel, says there is a need for loans and it would be helpful if just two community banks expanded their small business lending. She adds that any amount of new credit that can be extended to small businesses is a good thing.

Banks interested in acquiring low-cost capital might be attracted to the Treasury fund and they might be enticed by the built-in incentives to direct new-found capital into small business lending, says Dan Stewart, Arizona market president for Mutual of Omaha.

But then he echoes what others say: “The (law) doesn’t encourage banks to take on more credit risk, so qualified borrowers are the key.”

    By the Numbers
    The Small Business Jobs and Credit Act of 2010



  • Establishes a $30 billion Small Business Lending Fund within the U.S. Treasury
  • Treasury will use money to purchase preferred shares in small- to medium-size banks that voluntarily participate in the program
  • SBA’s loan guarantee would increase from 75 percent to 90 percent
  • The SBA’s maximum loan amount would increase from $2 million to $5 million

Arizona Business Magazine Nov/Dec 2010

Projections

Fewer Jobs Will Be Lost This Year, But Growth Will Remain Slow In 2011

In an updated forecast released today, the Arizona Department of Commerce Forecast reports that the state’s nonfarm job losses for 2010 have been revised downwardly. The department now forecasts that the state’s economy will lose 25,700 jobs this year, as opposed to the 50,400 originally forecast. However, the department also revised its forecast on how many nonfarm jobs Arizona’s economy will create in 2011, from 23,100 to 16,500. The fact that Arizona will be losing fewer jobs this year is being attributed to:

  • Federal government economic stimulus program spending that began in 2009.
  • Continued employment growth in the education and health services sector.
  • Improved job growth in the professional and business services; trade, transportation, and utilities; leisure and hospitality; and natural resources and mining sectors.
  • Stronger than anticipated global economic growth.


The downward revision in 2011’s job growth rate is being attributed to:

  • Tepid growth in the private sector due to sluggish business and consumer spending.
  • Large state and local government budget deficits.
  • A slowdown in population growth.
  • Limited consumer and small business lending by banks.


Gains in five sectors and losses in six sectors are expected over the two-year period (2009 to 2011). The major sectors in the Arizona economy where job gains are forecast include: educational and health services; professional and business services; trade, transportation and utilities; leisure and hospitality; and natural resources and mining. Sectors with projected job losses during the same time period include: government; construction; financial activities; information; manufacturing; and other services.

Arizona Sector Employment
Average Annual Over-the-Year Change


2009

2010

2011

Total Nonfarm

-7.3%

-1.1%

0.7%

Manufacturing

-11.6

-3.0%

1.3%

Natural Resources/Mining

-17.8%

1.8%

12.3%

Construction

-30.8%

-11.8%

1.8%

Trade, Trans. & Utilities

-7.1%

0.6%

0.6%

Information

-6.4%

-6.4%

-2.9%

Financial Activities

-5.0%

-3.2%

-1.6%

Professional & Business Svcs

-10.4%

-0.3%

2.8%

Educational & Health Svcs

2.7%

2.6%

1.8%

Leisure & Hospitality

-5.2%

0.4%

0.8%

Other Services

-6.6%

-2.1%

2.0%

Government

-2.2%

-1.8%

-1.9%


Total Nonfarm Employment
Annual Average Growth Rate

2009

2010

2011

Arizona

-7.3%

-1.1%

0.7%

Phoenix MSA

-7.9%

-1.0%

0.8%

Tucson MSA

-5.1%

-1.1%

0.4%

Rest of State

-6.4%

-1.1%

0.6%