New lending program

To companies and entrepreneurs who say banks are not lending, the answer is: They are now ”“ through a new program that originated in Ulster County and being rolled out in every county throughout the state.

The Credit for Success program came out of a study done by financial task force before Ulster had a county executive and was mulling the decision to create the position in 2008.

Seven banks with a presence in Ulster ”“ Catskill Hudson, Provident, Roundout Savings, Sawyer Savings, TD Bank, Ulster Savings and Walden Savings ”“ agreed to put $150,000 each into the pool, making $1.2 million available to Ulster-based business borrowers.  The program was put together at the end of November 2009 and is seeing its first applications coming in now, according to Michael Shaughnessy, executive vice president and chief lending officer for Ulster Savings Bank in Kingston.

“In order to qualify,” said Shaughnessy, “a small business or start up would have to show they had been rejected by at least one bank in the county because they did not qualify for ”˜regular”™ financing. It doesn”™t have to be with a bank involved in the Credit for Success program. They would then apply through one of the member banks, and the Small Business Development Corp. in Kingston would help them prepare a written  business plan, get the financial statements in order and fill out the application.”

From there, says Shaughnessy, the paperwork would go to the New York State Business Development Corp., which would be the servicer for the project. Applications would be made to the Small Business Administration for approval and then maintained by the NYBDC. “The best part of this program is the loan is guaranteed by the SBA. For the member banks, they are taking what might be a risk, but the risk is spread out over the consortium,” he said.

The minimum loan amount is $20,000, the maximum is $150,000.

How quickly can a loan turn around? “It depends,” said Andrew Lenahan, executive vice president of the New York Business Development Corp. “Depending on the type of loan, we can turn around loans relatively quickly. The SBA has been very good. The turnaround time can drag on if the borrower doesn”™t have all his financial paperwork in place. If the loan has a real estate component to it, that may also slow the process.  We would need an environmental impact statement as well as an appraisal before we could proceed.”

 

But for those who have an idea, either for a startup or expansion of a current business, the best thing to have handy is an articulate business plan and financial statements that aren”™t mired with question marks. “Entrepreneurs often have fabulous ideas, but they are in their heads, not on paper,” Lenahan said. “You need to sit down and create a written business plan that makes financial sense to a lender. The Small Business Development Center is there to help potential borrowers do just that. The SBDC will also make sure the business plan is not only well organized but is something the borrower can work with and build on.”

 

It doesn”™t matter how many zeroes are at the end of the number, either, said Lenahan. “Banks and lenders need to see a well-structured business plan that makes financial sense, balance sheets that balance and accurate financial reporting,” he said. “Whether it is for $5,000 or $500,000, the needs are still the same. The more sophisticated and thorough the borrower is, the faster the process works. Part of a small business”™ frustration is how long things seem to take; if they are prepared, they do not take long at all.”

Shaughnessy said those who come prepared can optimistically  expect to see a 30-day to 60-day turnaround. “The tools are there to make sure they are prepared,” said Shaughnessy. “The SBDC is ready, willing and available to help people prepare to work with the consortium here in Ulster.”

“The banks own us,” said Lenahan. “And just like the potential borrowers, we have to have a business plan; we do one annually. It helps a business see where it wants to go, how it will accomplish its goal, what they were able to accomplish and what didn”™t happen. By updating your business plan, you are able to change gears to adjust. Every month, we prepare a budget and we require a projection from borrowers. We are s small company and smaller than some of the companies we lend to. The value of a business plan and using it as a financial guideline is very important no matter what your business or what size it is.”

Shaughnessy and Lenahan said U.S. Sen. Charles Schumer, D-New York, has helped promote Credit for Success.

“Like Ulster, each county has a consortium of banks within that county,” said Shaughnessy. “They each contribute 12 ½ percent, which helps each minimize the risk.  The criteria, aside from the obvious business plan and financial paperwork, would be that the business be based in that county and that the borrower does business with a bank within the consortium. It might even be the bank they are currently doing their business banking with.

“The beauty of the program is the SBA guarantees 90 percent of the loan, which makes it a very attractive proposition for the banks who are involved,” he said. “It also makes credit available to a person who has been turned down because their loan was a bit ”˜unconventional.”™ It doesn”™t mean it isn”™t going to be a successful business, but it does have to be one that makes sense to the lenders involved.”

According to Lenahan, every region of the state has implemented the Credit for Success program. In the Hudson Valley, there are another six banks considering joining the program. The next step for small business borrowers: If you”™ve been turned down for a conventional loan, contact the Small Business Development Corp. to find out which banks are participating in your county.