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Small businesses still facing problems getting bank loans
18 April 2009
DAYTONA BEACH -- Carli Lucia wants to open a new preschool here while Lee and Kathy Griffith hope to expand their Hidden Lakes Golf Club in New Smyrna Beach.
Both have run into roadblocks getting bank loans to finance their business plans despite federal efforts with the economic stimulus package to grease the wheels and improve access to credit.
"I have a site identified and the owner is willing to work with me, but I need money to buy it and start the school," Lucia said Friday at a small-business lending summit at Daytona State College organized by U.S. Rep Suzanne Kosmas, D-New Smyrna Beach. "I have put in several applications, but only one has responded and they turned me down, something about collateral. I have called four times to find out why and gotten no response."
Loans for new businesses are not based on the possible success of a business plan, said Sam Willett of Bank of America.
"We do not do new business loans. We want to see success over two years. The rate of default in the first two years is very, very high," Willett said. "Applicants have to have capital to prove they can repay the loan."
Capital is either a savings account or home equity. Credit scores of at least 680 also are required.
The Griffiths have a good credit rating and the golf club is making money, but loans are tough if tied to real estate where values still are dropping, Lee Griffith said.
"We had to get new appraisals and were told we needed to put in more collateral, so we are at a stalemate," he said. "Banks are being more demanding and we need help with (loan) guarantees than just doing it all ourselves."
Some programs in the American Recovery and Reinvestment Act allow the Small Business Administration to expand from 75 percent to 90 percent how much of a business bank loan it can guarantee and provide interest-free loans of up to $35,000 to pay off existing debt.
But those are not enough unless the banks and lenders remove roadblocks and clarify loan standards, said Veronica Wallace of the SBA.
"It's hard to determine what the banks are doing and what they want. If we had better information we could better steer people in the right direction," she said.
Bank officials said they have not changed lending criteria for the past year, but all agreed that a survey of the criteria and loan programs would be provided to the SBA and the Daytona State College's Small Business Development Center.
Other suggestions included changing some SBA loan programs to help refinance and roll over business loans. Others suggested changing the law that requires banks to set aside cash to cover loans that are 30 days late and to skip required appraisals for extending or rolling over existing loans in good standing while shortening the loan period.
"I like the discussion and these are the kind of suggestions I can take back to Congress," Kosmas said.
Source: news-journalonline.com
