Economic conditions are tough but small- and medium-sized business in the Hudson Valley may have allies they don”™t know about. That is the message emerging from bankers and other experts who said that communication and conservative business practices can see most entrepreneurs through the current downturn. Â
They spoke of the encouraging strength being shown by relatively small community banks and banking organizations locally who have largely declined funds from the federal TARP program but whose conservative lending practices have left them in a strong enough position where they are encouraging would-be borrowers to make loan applications.
About 65 people attended a breakfast conference at SUNY-New Paltz Jan. 14 with business, banking, academic and political leaders from Ulster County and the Hudson Valley. The event sponsors included the Ulster County Development Corporation, the New Paltz Regional Chamber of Commerce and the Council of Industry of Southeastern New York. Â
“Focus on fundamentals,” said A. Rief Kanan, a CPA and director emeritus of the Business Institute at SUNY-New Paltz. He said his area of greatest expertise was businesses with assets between $5 million and $150 million and stressed that even with such a broad range of assets some simple steps can greatly improve the bottom line.
He cited a company with about $10 million in assets that he said was having trouble in this economy collecting receivables. So the company hired a college student with good phone skills, provided about 30 minutes of training and turned the student loose on the phone to “carefully gently nudge accounts receivable to make payments.” The result was $500,000 in additional cash received over the course of a year from an investment of about $24,000, Kanan said. Company officials were, “surprised how simple it was.”
But he said it reinforced his message about fundamental steps being doubly important in tough economic times. “High profitability covers a multitude of sins, but especially at times like this, look at the strengths and weaknesses of your business.” Â
He also said that business owners must “be ruthless” when assessing employee performance and be willing to fire unproductive employees. And lastly he warned business owners to make contingency plans in case things get worse.
But the conference was generally upbeat in terms of reporting that help is available.
Kanan said that businesses should access resources available at the SUNY New Paltz business school, including the “expert”™s data base” available at the college Web site. An accountant himself, he reminded business owners to seek help from their accountant, “Who too often tend to be overlooked as a resource and business partner.”
A coterie of banks and banking-related institutions such as the Mid-Hudson Small Business Development Center and the privately funded New York Business Development Corporation (NYDBC) are available specifically to help businesses.   Â
Patrick J. MacKrell, president and CEO of the NYDBC said that among community banks in general, “There is capital available to credit-worthy small businesses.” He said that bankers are business people who understand cyclical economies and will still make loans if the fundamentals are sound and a viable business plan is in place. And he said that NYDBC can be considered as a possible resource in partnership with local banks.
He invited businesses that are discussing loans with their bank and that have “felt the agony as the pen is hovering” wondering if the loan officer will approve the loan, to suggest the bank contact NYDBC about terms for a loan partnership. He said interest rates are competitive. “When borrowers hit a difficult patch, we can be proactive. Think of us as the Dorothy solution, always there when you click your heels.”
Other help is also available from the Mid-Hudson Small Business Development Center, said Arnaldo Sehwerert, of the MHSBDC. “Right now it”™s very common to have a cash flow problem, so we work with them” in counseling solutions, said Sehwerert
He said it is in the interest of a troubled business to communicate early and often with bankers and other resources to face problems head on. “Our success rate is very high if we catch them early,” said Sehwerert.
Senior officials from M&T Bank, the Rondout Savings, Ulster Savings Bank, and Wilber National Bank and the Mid-Hudson Valley Federal Credit Union were in attendance and all spoke of relatively strong positions due to their conservative loaning practices.
Asked by the conference moderator, all agreed they had been affected by the economic downturn, largely through “an uptick in delinquencies and bankruptcies,” said Chris Corallo, CFO of the MHV Credit Union. He added that new requirements and fees on transactions associated with Freddy Mac and Fanny Mae loans have increased costs.
The NYBDC, a banking entity, did not take TARP federal bailout funds, said MacKrell, because it had sufficient capital without it, and because the money was offered at a high interest rate, nearly double the standard inter-bank loan rates M&T Bank has “participated in the bailout at a minimal level,” said Ellen O”™Leary, vice president of M&T Bank.
Wilber National Bank has accepted TARP funds, said bank vice president Paul Hakim said, noting that with $12 million in federal funds, “It allowed us to put close to $100 million of new loans on the streets.”
Neither Ulster Savings Bank nor Rondout Savings bank accepted TARP money, saying they had adequate capitalization. Both institutions are now commercial banks having expanded about a decade ago from their traditional savings bank services. Thus, they said, they were in an excellent position to provide loans to homeowners and businesses.
In fact the economic problems of larger, more ambitious lending institutions “actually in some ways have helped us,” said James Davenport, CEO of Rondout Savings. He said the bank has seen “a growth in loans, certainly. There”™s been a flight to quality.”
