Small businesses are often described as the backbone to the economy. If that is so, then the current credit crunch which particularly affects small business, is something of a spinal fracture, inhibiting full recovery of the economy.
Now, a consortium of local banks and the state”™s private Business Development Corp. (BDC) have united under the aegis of Ulster County Executive Mike Hein to create a targeted lending program aimed at small business owners who are facing difficulty garnering credit.
They say their program can be replicated elsewhere.
The program is drawing high level attention and praise. “Programs like the Ulster County banking consortium are exactly the type of initiatives we hope to encourage as we move towards a robust small business-fueled recovery in the coming months,” said Dennis Mullen, president and CEO of the Empire State Development Corp., in a statement.
Seven local banks and the BDC met in Hein”™s office Nov. 18 to unveil the “Credit for Success” program, providing a pool of available capital for extending credit to small businesses in amounts between $25,000 and $150,000.
To qualify, a business must demonstrate it has been unable to get the credit required from a local lender, but must also present a credible business plan. The fund has about $1 million total to lend now.
“It”™s a little extra stretch with a shared-risk concept,” said Lance Matteson, president of the Ulster County Development Corp. He said applicants to the new credit fund must show a “declination letter” from a local bank, “so where there is an inability to do a conventional loan,” this program can be brought into consideration to meet a need. The prospective borrower would have to work with the BDC to fashion an acceptable business plan
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The purpose of the loan can be flexible but is aimed at creating and more particularly retaining jobs.
It is not a giveaway program. “These are loans that have to be bankable; we are not talking a out propping up a nonviable business plan,” Matteson said. “This is for businesses that need a little help getting through a rough patch.”
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He praised the lending institutions involved, saying that the program would not be a money-maker for the banks. He said the local banks would benefit from the publicity and from spreading awareness that they may be able to make loans national banks will not. “But basically this is about the leaders of these banks saying we want to do our part to help small business in these still difficult times,” said Matteson.
The BDC is a privately owned corporation that is funded by banks in the state to make loans that may be too high-risk for a single institution to undertake. The wrinkle here, said Pat MacKrell of NYBDC, is the relatively modest size of the credit offering.
“The concept is not new,” said MacKrell, “But what”™s new is an additional layer of local banks to deal with local issues in the community, where they know the people on Main Street and know their needs and opportunities and challenges. That is unique.
“The perception is small business cannot get credit, so this is our way of saying we will make loans,” said MacKrell. But they will not be reckless about it he cautioned. He predicted that many businesses will leave 2009 “with very shaky financial projections” and said that when companies apply for the special credit consideration, the state BDC will consider whether the rough year “is an aberration or a trend,” said MacKrell. “We are not going to loan into an abyss.”
MacKrell applauded the local officials and banks involved and said that the program could be replicated in other counties.
The banks involved are Catskill Hudson Bank, Provident Bank, Rondout Savings Bank, Sawyer Savings Bank, TD Bank, Ulster Savings Bank and Walden Savings Bank. Local credit unions initially expressed interest in participating, but officials at the Nov. 18 event noted that legally credit unions could not participate.
The loans have interest rates of prime plus 2.75 percent.
Anyone interested could contact any of the involved banks or Paul Rakov of the Ulster County Development Corporation, at 338-8840.
