Small business loans have notably increased in Fairfield County this year, with area banks saying they expect the trend to continue into 2017.
“Small businesses have great access to capital right now,” said Michael Madonia, vice president of business banking for M&T Bank in Connecticut. “Those are the businesses that can help improve the economy and create jobs. We’re very excited about the segment, especially in Fairfield County, where we’re seeing a sharp increase in people and companies looking for small business loans.”
“That segment is very robust,” agreed Tony Giobbi, senior vice president and chief lending officer at Newtown Savings Bank, who said the institution made about 70 such loans last year and expects to approve over 100 by the end of this year.
“Things were slow,” he said. “After several years of tough times, small business owners were reluctant to make further investments in their business. But this year they started to feel a little bit better, and are increasingly looking to expand operations or to replace equipment that is becoming obsolescent.”
“People had been putting projects on hold,” added Tim Bergstrom, senior vice president and head of business banking for Connecticut at Webster Bank in Hartford. “But we’re now seeing very strong volumes in Fairfield County, particularly in real estate.” Webster’s small business loans are up 16 percent year-over-year, he said.
Rick Muskus, executive vice president and chief lending officer at Patriot Bank in Stamford, said that historically 11 percent of Patriot’s business has come via small business loans. “But as of today we have 21 percent in the pipeline that fits the small business category,” he said. “For the past few months, we’ve seen a lot of people starting new businesses or purchasing an existing business due to aging ownership or for other reasons.” That trend has been particularly noticeable in the restaurant and liquor store business, he said.
Still, Muskus noted that the county “is not an inexpensive market to start businesses in. They need a solid banking partner, and we’re actively working to improve and expand our presence in the sector. We’re working with our branch and assistant branch managers all the way down to our tellers to learn more about our small business loan program, not just to discuss with customers but also so they can talk knowledgably about it in their non-professional life.” He said that up to 80 percent of Patriot’s business comes from word of mouth.
Meanwhile, Buffalo-based M&T, through its 2015 acquisition of Hudson City Bancorp, has almost doubled its small business lending rate in Connecticut, up 20 loans from last year and ranking as the seventh largest Small Business Association (SBA) lender in the state. M&T was recently honored at the Connecticut District Office of the SBA Eagle Awards Ceremony with the award for Most Loans to Small Business Exporters for Fiscal Year 2016.
“Connecticut has always been a target area for us, Fairfield County in particular,” Madonia noted. “We see the county as a growth market for us.”
Small businesses have “always been a forte of M&T’s,” he added, noting that the bank began in 1856 as Manufacturers & Traders Bank.
Most banks adhere to the SBA’s guidelines when defining “small business”: according to the group, the median small business loan is about $130,000-140,000 with the highest around $250,000. M&T’s average small business loan in Connecticut is $228,941, while Giobbi said Newtown Savings’ average loan in the sector is $80-100,000, with a cap of $250,000.
Landing a loan can be relatively painless, as long as the applicant is prepared. “They need to have spoken with their accountants and attorneys to make sure they have a good, viable business plan in place,” said Madonia. “We don’t want to just make loans – we want to have a conversation where we can understand clearly what their aims and needs are.”
“They should have a good business plan that’s realistic and reflects the entrepreneur’s objective,” agreed Giobbi. “They need to demonstrate that they have a good handle on understanding their financial situation, including profit and loss statements and the cash flow to repay the loan. And they need to watch their personal credit history … someone who has too much personal debt or an awful credit score is at a disadvantage.”
Newtown regularly offers programs in conjunction with the SBA and its Small Business Development Center, which offers local SBA outreach in the form of free counseling and resources to small businesses, to help educate potential lendees on navigating the process. Local SBDC chapters are located in Danbury, Norwalk and Stamford.
Another resource is SCORE (previously known as the Service Corps of Retired Executives), a national 501(c)(3) nonprofit organization that provides free business mentoring services to entrepreneurs; its Fairfield County chapter is in Norwalk.