Local lenders step up for small business

If surveys locally and nationally capture continual problems by small-business owners obtaining loans, it could be they are simply not shopping at the right bank.

A Fairfield County Business Journal review of small-business bank loans shows that while about half of area community banks contracted lending in the first quarter, the drop was more than covered by banks that expanded lending ”“ a few by significant margins.

If the overall pace of small-business lending slowed in the fourth quarter, community banks apparently did not slip back into recessionary mode in Fairfield County. More than a dozen local community banks put an additional 150 loans into Main Street for an extra $33 million of spending power by area small businesses, according to data on file with the Federal Deposit Insurance Corp.

That does not include totals from larger banks like Bridgeport-based People”™s United Financial Inc., for which the FDIC does not break out local data. People”™s United had nearly 24,000 loans outstanding to small businesses across its Northeast territory in the first quarter for a total of some $3.2 billion, a decrease of $44 million due to a contraction in commercial mortgages for small businesses.

The FDIC numbers do not reflect whether the increases and decreases for specific banks are the result of credit officer decisions, bad loans coming off the books, demand by area small businesses or simply the normal, shifting business practices as companies initiate or complete projects and switch banks.

In all likelihood, it is all of the above. Still, in cases where significant increases have occurred, it is a difficult argument to carry that a bank is being overly restrictive. Take Union Savings Bank in Danbury ”“ while it slightly contracted its book of regular commercial loans to small businesses in the first quarter, it greatly increased its financing of commercial mortgages for small businesses, averaging a new deal every three days during the quarter for a $28.5 million increase.

And in some cases the trends are even more pronounced if the first-quarter data is compared to the totals of a year ago. In the past year, Ridgefield-based Fairfield County Bank has held its small-business commercial mortgages outstanding at about $122 million but has significantly increased its regular commercial lending, adding nearly 400 loans on a net basis from a year ago to add $17 million in additional spending power in the market.

Similarly, Bank of New Canaan has more than doubled its commercial small-business lending totals in the past year, including totals from its new subsidiary First Stamford Bank, which opened its doors last year with a single branch.

“I think everyone else has maybe pulled back,” said Heidi DeWyngaert, president of Bank of New Canaan and its parent company BNC Financial Group Inc. “We”™ve taken advantage of that. We are very proactive. We opened Stamford a year ago and everyone thought we were crazy because we were in the middle of the recession ”¦Â  We are actively out there ”“ making loans, turning loans around, and the word is getting out.”

DeWyngaert gave no timeline for additional branches in Stamford or Norwalk, which it has considered, but the company”™s Stamford foray has caught the notice of at least one commercial broker.

“Stamford First Bank is extremely aggressive, and they are loaning out to $5 million,” the broker said. “I”™ll tell you about the timeliness of the process ”“ it moves.”

Small-business lending declined 2.4 percent nationally in the first quarter of 2011, even as gross domestic product continued to grow, according to the Small Business Administration”™s Office of Advocacy. Micro business loans outstanding ”“ those under $100,000 using SBA”™s yardstick ”“ were down 2.9 percent.

Even residential and consumer lending decisions are having an impact on some business owners. Michael Weigold, owner of Weigold Electric in Greenwich, said he received a solicitation from JPMorgan Chase to refinance the mortgage on his house, which also serves as the main office for his small business. After spending more than $400 on an appraisal needed in the application process, he says the bank then turned him down ”“ a frustrating experience given the effort and expectations he had expended.

In a survey of more than 1,200 private business owners released earlier this month, researchers at California”™s Pepperdine University reported that banks are denying the majority of business loans at present due to increased regulatory pressures they are facing.

Despite the high rate of banks declining loan applications, 71 percent of private business owners who responded to the survey said they did not seek friends and family financing after being denied from a bank loan. Only a year earlier, more than half of business owners polled said they relied on friends and family as a major source of funding.