Ulster County”™s “Credit for Success” program has gotten state and national attention in its quest to give small businesses a second shot at getting loans already denied by their regular banks.

Although U.S. Sen. Charles Schumer recently told the Mahopac-Carmel Regional Chamber of Commerce he hoped to see a similar program rolled out in every county in the state, “That would be a very difficult task for some parts of the state to accomplish,” said Patrick MacKrell, president and CEO of the New York State Business Development Corp. (NYBDC) in Albany, which promotes business lending among other initiatives.

In lieu of a county-by-county program, NYBDC has created a seven-part regional program designed to mimic what Ulster County has done within its own borders. Businesses in Dutchess, Orange, Putnam, Rockland, Sullivan and Westchester counties will now have the same opportunity as businesses in Ulster to get a second chance at a loan approval through the NYDBC”™s regional consortium.
MacKrell says more than 30 banks are participating statewide and to date have accumulated a total pool of nearly $8.5 million.Â MacKrell hopes as time goes on and the program proves to be financially viable, the pool of money will grow and more banks will come into the program.

Banks participating regionally include HSBC, Provident, Empire State, Walden Savings, Hudson Savings and Mahopac National. “Each bank contributed $150,000 into the program, and it is guaranteed by the SBA,” said MacKrell. “This way, they are helping the small business owner, but not taking on the entire risk alone.” Since it is a revolving loan fund, as loans are repaid, the coffers are replenished.

Getting turned down for a small business loan automatically qualifies the business owner to apply for “Credit for Success.”

With rejection letter in hand, the next step is sitting down with the Small Business Development Corp. in the area closest to their business: for Dutchess, Sullivan and Orange, the contact is the Kingston SBDC, run by Arnaldo Sehwerert. Businesses in Putnam, Rockland and Westchester can turn to the SBDC office based in Rockland Community College in Suffern, run by Tom Morley.

“The process is simple,” said Sehwerert. “You apply for a loan at a bank, most likely the place where you do your regular business banking. If they do not approve you, for any reason, and you have a viable business, the next step is to come into the Small Business Development Center and work with our counselors. There is no charge for our services ”“ it what we are here for. We help you put together a business plan to show the bank your business is stable and you have the ability to repay the loan.

“Frankly, if you don”™t have a viable business, you should not apply for the program. It”™s a second chance at getting that needed funding, but it is not for people who do not have definite goals and can showÂ they can stay afloat.”

Since the NYBDC administers the loans, banks feel more comfortable joining the consortium where the risk is less and the program is administered by a trustworthy source, said Sehwerert. “NYBDC has extensive experience handling loan programs for third parties and it does the underwriting and is well respected in the banking industry. We help to take out the guesswork, get the financial house in order and a good business plan put in place. NYBDC gets them through the loan process, reassuring the banks and public ”“ whose money the bank is lending ”“ the funds will be professionally managed.”

“The programÂ makes sense for banks because risk is spread out,” said MacKrell. “We bring responsible management to the table; we also bring responsible people to the table so banks can feel confident they are lending to businesses that are on track and on top of their finances.”

“Overall, I think it will be a help to pump up our local economy,” said Steve Drobysh, commercial loan officer for Provident Bank. “It will provide some small businesses with access to capital they would not normally have in this economy, so it will certainly be helpful. This is an integral part of banks stepping up to the plate.

“I can”™t speak for the larger banks,” said Drobysh, “but community banks are lending at same level they have always done.”

“The program is designed so the business owner is compelled to create a business plan and to truly understand businessÂ their cycle, cash flow and help them put together a financial plan based on current economy and to adjust accordingly as financial conditions change,” said Jim Landi, president and CEO of Hudson Valley Bank in Yonkers. “To qualify, the business owner has to take a hard look at his primary market and develop a marketing/advertising plan around the demographic times that currently exist.

“These are difficult times,” said Landi. “With the Small Business Development Center, business owners can get their financial house in order and create a realistic business plan.Â The goal is to survive now ”“ not necessarily prosper ”“ and as the economy gets better, the better shape their business will be in.

“Until the real estate market turns around, people are going to have to deal with the new economic times,” Landi said. “I do feel very badly for small business owners who extended credit to developers, only to have the market come to a near standstill. Many will survive, but right now, they need to sit down with a knowledgeable organization and formulate a business plan that will keep them afloat until things improve.”

John Kraus, senior loan office for Mahopac National Bank, like Drobysh, said loans are available.

“This program is just getting off the ground,” Kraus said. “It is not going to be a stop-gap measure for the credit crunch. It is designed to help small business owners obtain credit through normal channels with an SBA guarantee. Most of the small community banks are lending to small business. This program is designed to alleviate the misconception that they are not.

“It”™s an open ended loan program for the banks taking part. There is no sunset or time limit on the program,” said Kraus.

“The program is designed as the final stop for small biz to obtain credit where they could not get through normal challenge,” said Kraus. “Either they are challenged by economic conditions or relying on a business plan projections or re-sized businesses””may have had some financial damage and taken the measures to get back on their feet and need that extra credit to help them get there.” ?There is approximately $1 million available now through the Hudson Valley Regional Consortium. Credit standards still apply and loans are at prevailing rates. Loans range from a minimum of $25,000 to a maximum of $150,000.

“This program is a great alternative for businesses that have been turned down,” said Kraus. One word of warning: “It”™s important to preserve your personal credit rating…it can take you a long way, particularly when banks are looking at how you are handling your own finances. Keeping your personal financial house in order is a definite plus.”