Calvin: Well good afternoon and welcome to
this fourth in a series of Google Plus Hangout on air with SBA as part of National Small
Business week 2013. I’m Calvin Goings your host for today’s chat about lending and opportunities
for small businesses and entrepreneurs across the US.
We’re excited to have a great panel of folks who’ll be talking to you about their experiences
with lending at SBA. That includes Jeanne Hulit with the US Small Business Administration,
where she serves as the assistant administrator for the office of capital access. Also joining
us is Nikos Ridge, the CEO of Ninkasi Brewing Co. in Oregon and Dave Radar, SBA Lending
Business Executive with Wells Fargo. As I mentioned a moment ago SBA is celebrating
National Small Business week this week. In fact, this is the 50th anniversary as proclaimed
by the President earlier in the week. This really is an opportunity for us to celebrate
the best of the beast in small businesses across the US.
We’re going to be taking your questions for this Google Plus Hangout on air via Twitter
using the hash tag #sbw2013. If you’ve got a great question you’d like to post to our
panel, again, using the hash tag #sbw2013. As all of us know small businesses are incredibly
important to the US economy. Today about half of all working Americans work for a small
business and about two-thirds of all new net jobs over the past 15 years have come from
small business. We at the SBA are honored to play a role helping small businesses start,
grow, and succeed. Well let’s get right down to it talking about
lending and what small businesses and emerging small businesses need to know about access
to capital with the SBA. Jeanne Hulit let’s start with you. You know a little bit about
banking having worked in banking in the private sector and now heading SBA’s office of capital
access. Tell us a little bit about your experience, what brought you to SBA and then about the
role that [00:02:00] SBA plays in helping entrepreneurs with access to capital.
Jeanne: Sure, thank you Calvin. It’s really an honor to be on this panel because I think
that providing access to capital is one of the most important things that the SBA does
to support small businesses. As Calvin mentioned I was a lender as a commercial banker before
I joined the SBA in 2009. The reason I joined the agency was, as many of you can remember,
there was a credit crisis and the banks were having difficulty providing the kind of credit
to support many small businesses. That’s really where the SBA steps in and I
was honored to join the administration at that critical time where we were able to step
in and work with our lending partners to guarantee loans to keep credit flowing to small businesses.
That’s what we’ve done over the last two years. We have record SBA lending support, 30 billion
dollars to small businesses last year, 30 billion dollars the year before, historic
highs for the SBA. We are there to provide credit when businesses
cannot get credit elsewhere. We do that by partnering with banks. We have three major
program areas. One is our 7A lending program where we guarantee loans that banks would
not be able to make otherwise without the support of the US government. That’s called
our 7A loan program. The other program is our program that supports
long term fixed assets called the 504 program. That’s to finance real estate or long term
fixed assets like machinery and equipment. Again, it helps to provide structured financing
where the banks participate with 50% of the financing and the SBA participants participate
to the subordinated role of 40% enabling the business to get much more higher leverage
on their assets than they would conventionally. Then the third program is our micro loan program,
which provides a small dollar loan. Loans under 50 thousand dollars to the start up
business that isn’t quite ready to be working with a bank. [00:04:00] They need a little
bit more hand holding, a little bit looser structure. They may have some aspects of their
business that the banks can’t get comfortable with and that is our micro loan program and
we provide that through micro loan intermediaries around the country.
Those are our core lending programs. We have about 100 billion dollars in loans that we
have supported, that we support currently. This year, year-to-date, we’re up about 10%
over last years volume so we know that demand is still there.
Calvin: Very impressive numbers. Anything from a 20 thousand dollar micro loan to a
new beauty salon that might be opening up to a two million dollar loan for a business
looking to capitalize and to expand and up to a five million dollar loan for someone
who wants to build a new building or buy heavy processing equipment for their manufacturing
business and everything in between. Jeanne: Absolutely. We do manufactures. We
do service company. We do mom and pop shops, everything in between.
Calvin: Great. Well, that was very helpful as we set up and talk about a success story
in SBA using some of those tools and resources. We’re so happy to have Nikos Ridge with us,
the CEO of Ninkasi Brewing Company in the state of Oregon, right out here in the great
Pacific Northwest. Grew up in Eugene, went to the east coast for school. I read something
about a horrid Ranger Pickup. Nikos tell us a little bit about your small
business story and specifically how your business was able to leverage the tools and resources
of SBA to grow into the phenomenal company that you’ve become today. Tell us a little
bit about your story. Nikos: Definitely. We’re in the craft beer
business, which is a really fun industry and it also happens to be a very capital and facilities
intensive industry. We have worked through the course of several different phases of
expansion with the SBA on multiple occasions. We started in 2006, and originally was just
my partner Jamie and myself, and have grown to 85 team members in [00:06:00] the last
close to seven years now. Have gone through the process of three separate
escalated tiers of expanding and in each case have worked with SBA through their 504 program
to help to leverage the equity that we put back into the business and allow us to grow
our facilities and grow our equipment needs along with the demand now that’s growing for
our products. I can honestly say that we definitely wouldn’t
be where we are today without the support of the SBA. It allowed us to take those precious
dollars when we were a start up, but a high growth company and leveraged into the ability
to continue to expand. Every step of the way they’ve been there to support that and support
the other local and regional lenders that we’ve worked with. It’s really been a critical
part of our success. Calvin: That’s great. You said you have 85
employees now? Nikos: We do have 85 with, I believe, five
open positions right now. We’ll be crossing the 90 threshold probably before the end of
the summer. Calvin: You’ve got a help wanted sign out
as we speak so to say? Nikos: Indeed, indeed, yeah. They’re good
jobs, good manufacturing jobs here locally. We create a great product that we’re able
to send around the western United States. Calvin: That’s great, that’s great. Thank
you for sharing part of your story with us and the folks that are watching. Jeanne lets
go back to you and talk about this network that SBA is part of. We’re talking about the
lenders right now, but there’s that support structure as well.
Tell us a little bit about the resource partners that are out there and how those resource
partners help small businesses get ready for financing and some of the loan programs that
you discussed a few minutes back. Jeanne: Sure. One of the key parts of the
SBA’s mission is to help entrepreneurs. We do that through business counseling. Our resource
partners include the small business development centers that are in every state in the country.
It’s a partnership between the SBA, the federal government, [00:08:00] state government, and
universities to provide free business counseling services to businesses to help them succeed.
We also partner with SCORE, the Service Corps or Retired Executives, who are the mentors
for America’s business. They provide all sorts of resources in counseling and partnering
and mentoring to small businesses frequently on a long term basis and for start ups to
really provide their expertise to these businesses that they help grow.
Then we have the women’s business center, which is again another free business counseling
service that provides a lot of hand holding and counseling to businesses. Not just women
owned businesses, but a lot of rural businesses that are not close to a university structure.
They’re great resource partners and the way we work with them and the way the banks work
with them is frivolously a bank will look to a business for their business plan. They
want to see an articulate business plan that is reasonable in their projections. That has
structured financial statements that they can help assess the risk to the institution
in providing the financing. Our businesses partners, our resource partners help provide
that kind of support so that the loan applicant is credit ready when they enter the bank.
Calvin: That’s great. Whether they’re an existing business owner that maybe has their business
plan up here, but hasn’t translated it to a written document yet. Someone who’s thinking
about going into small business or someone who has been around in business for five years
and is now ready to go after that 504 loan to buy a building of their own they should
really check out one of those small business development centers, those women’s business
centers, SCORE chapters, etc to get that first set of eyes to help them with their business
planning in the small business journey. Jeanne: Right. You want to be putting your
best foot forward when you’re talking to the bank. Now having the bank ask the questions
that you then go, �Oh, I should have thought about that.� The resource partner will walk
you through all those steps and make sure you’re prepared so you have the best package
and impression when you go to the bank. Calvin: That’s great. I also had a chance
to talk to one of our local centers here in the northwest. Apparently [00:10:00] as part
of the Affordable Care Act and the tax credit provisions that are available to small businesses
now. They can also soon visit their local resource [inaudible 00:10:08] they get more
information about the Affordable Care Act and some of the small business benefits that
that legislation has. Jeanne: Absolutely. They’re a great resource.
Calvin: Great resource all the way around. We’ll we’re also joined right next to you
by Dave Radar with the Wells Fargo, which is as I believe SBA large lender of the year.
Is that right Dave? Dave: That’s right Calvin.
Calvin: Well congratulations. Thank you. We look forward to you doing even more next year
to support small businesses. Tell us a little bit about what you do at Wells Fargo and the
role that Wells Fargo, your perspective as a lender, about what you’re looking for when
a small business walks into one of your branches. Dave: Sure Calvin, thank you. Thanks for the
opportunity. I really appreciate being on this really cool technology. It’s pretty good
for a banker here. I run the SBA lending business for Wells Fargo. We have close to 400 team
members across the country that are positioned to help customers succeed financially. We
absolutely love using the SBA program to help get more capital to small business owners
so that they can grow and add jobs to help the economy prosper.
We do that by working all of the different SBA programs like Jeanne said. The 7A program
where we use that program for term lending for purposes for expanding a business, for
� Calvin: Dave, tell us a little bit about term
lending means. Talk to us a little bit about that.
Dave: Term lending is typically where a borrower pays a monthly payment for a loan that they
use for purchasing a fixed asset [00:12:00], either real estate or equipment, both for
expanding their business, for starting a business. Any kind of purchase of a fixed asset we would
want the customer to obviously to have the cash flow to pay that loan back over a period
of time. Of five years, 10 years and 25 years is the maximum we can go with the 7A loan.
We use all of the tools that the SBA has for the 7A program. We’re also very big in the
504 real estate lending program. That programs used to help costumers acquire a new building
or renovate a building or purchase and construct a building. All those tools we help customers
grow their business and get more capital to help them win so that they can grow the business
and add jobs. We see these tools as absolute great tools
to help customers save cash because a lot of the SBA programs preserve capital and cash
for business owners. With the lower down payments offered by the SBA, as little as 10%, and
the longer terms to repay the loan that helps borrowers with lower monthly payments. All
of those things preserve cash for our borrowers and we all know that that cash flow is keen
to helping a business succeed. Calvin: Absolutely. I don’t want to put you
on the spot, but we’re talking 10’s of millions of dollars that Wells Fargo has worked with
SBA on this past year and made businesses, whether that be supporting [00:14:00] existing
businesses or the expansion of businesses a possibility. Thank you to the work that
we have and the relationship that we have, but as I mentioned I�m sure associate administrator
Hulit, next to you, has been encouraging to help us do even more next year as we enter
the new fiscal year. Dave: Well Calvin I�m proud to say that
Wells Fargo has helped a lot of customers. We have been the number one 7A dollar lender
for the past four years. We have been the first lender in the agencies history to lend
more than a billion dollars in the last two years. Our goal is absolutely to get out there
and help customers succeed in their financial dreams. To help them make their dreams occur
and happen and absolutely help them, like Nikos, to start a business, to grow the business,
and expand the business. Calvin: Absolutely.
Dave: We think that is a great use of these programs. The more we can do to help our economy
win the better. Calvin: In the process puts our friends and
neighbors back to work, improves our communities, makes the economy stronger and puts it on
a more sustainable long term path to a full and prosperous recovery. Speaking of Nikos,
Nikos tell us a little bit about your specific process. Your application from start to finish.
Talk to us a little bit about your experience with local lenders.
How long did it take? What should someone who is watching this right now, what should
they be thinking about? Maybe what’s the one thing you wish you would have known when you
started your application process for one of your loans?
Jeanne: Judging by the camera I think that Nikos might be having a camera issue Calvin.
Calvin: That does not look like Nikos below me. You’re right. All right. [00:16:00] I’m
sure Nikos will be coming back so Jeanne why don’t we talk a little bit about some of those
other options. We’ve been talking with Dave about the 7A and 504 loan program in particular,
phenomenal programs. Talk maybe a little bit about our work with
CDFI, our micro loan programs. What are some of the thresholds, some of the opportunities
and the folks in that space? What should you be thinking about as options for those programs
as well? Jeanne: Sure. One of the things that was a
casualty of the credit crisis is that we did see small [inaudible 00:16:34] lending fall
off. We saw lending in our under served communities fall off. As the credit became more available
we’ve had more businesses get support. We have seen that support going to larger dollar
size loans, more established businesses that have more assets for collateral.
We wanted to make sure that we were providing credit support for all of the market segments
and to address any market gaps. We have been working very closely with a non-profit mission
based lenders that are part of the US government network of community development. Financial
institutions, CDFI’s, or community development corporations, CDC’s, or SBA micro lenders.
There are non-profit mission based lenders that have a deep relationship in their communities
with many of these smaller start up entrepreneurs in the inner cities or in rural America that
may not traditional access to capital. We are now able to work with those organizations
to guarantee loans up to 250 thousand dollars through a program called community advantage.
That is a 7A loan program, but it is a program delivered by these non-profit mission based
lenders, who have a great opportunity to provide the financing with our program, but partner
it with the kind of counseling and support that these non-profit organizations have access
to. That’s one of our critical tools. We have about 65 [00:18:00] community advantage lenders
across the country. We’re bringing new ones on every day.
If a business is having a hard time accessing capital with a conventional lender like Wells
Fargo or another bank they may want to go on our website sba.gov/the state that they
reside in and find out through our district offices who the community advantage lenders
our in their region, as well who are micro lenders are.
Again, these are organizations whose mission are not only to provide capital, but to provide
counseling hand-in-hand. Those are great tools that we can provide to the smallest and the
start up businesses. Calvin: Absolutely. Some of the pother programs
that come to mind are Patriot Express Loan program for the men and women of our armed
forces or their family members who might be interested in going into business. As well
as the relationship SBA has and the Obama administration has with the National Franchise
Association helping ensure that veterans have a chance too. Such great dedicated employees
and they make great dedicated entrepreneurs we give them all the tools they need and they
can get and then offer it a successful business. In fact, I think about our Boots to Business
program and our mentoring programs that we offer.
Jeanne: Thanking you for bringing that up because Patriot Express is sort of a subset
of our 7A program and again, it is a program that is for veterans, but it’s not just the
veteran themselves it’s also for the veterans spouse or family member who is running the
business if the veteran is deployed. It’s a great program and it again provides a guarantee
partnering with the banks. What we have done recently over the Memorial
Day holiday we announced at Fort Bragg that our top 120 lenders across the country that
support veterans through our loan programs have made a pledge to increase their lending
to veterans 5% each [00:20:00] for the next five years. To support our warriors as they
return to this civilian life. We know that veterans disproportionally are
successful entrepreneurs and they are disproportionally starting franchises as well. Between our partnership
with the Franchise Association, our partnership with banks like Wells, who made this commitment
we’re making an effort to reach the veteran community to let them know about the programs
that are available to support their entrepreneur dreams. That’s really important in this time
in their lives. Calvin: Great.
Dave: Calvin? Calvin: Yes?
Dave: Dave. Wells Fargo is absolutely proud to be part of the veteran pledge. We sure
hope we can do more than 5% over the next few years, but that’s the beauty of a lot
of the SBA programs. We can reach out to small business owners whether they’re start ups
and in their infancy. We can help with the programs for those companies that have been
very successful and around for many years. Again, most veterans need capital. Woman owned
businesses need capital. Minority small business owners need capital.
The SBA programs can cover a lot of ground here. Again, it’s all about helping the banks
reach out , expand their credit boxes for customers who can’t get loans conventionally
and expand the opportunities for our owners to grow and get jobs.
Calvin: One of the things that you do hear still is that there is borrowers who are still
looking as the economy moves forward. I think one of the things that is important to remember
is where we’ve been and where we could have been. If [00:22:00] folks think back just
to February of 2009 and the economic situations we were in with losing 750 thousand jobs every
single month in the US. A credit market that was completely frozen, an economy that was
in a tail dive and most Americans worried about a great depression.
Then because of the Recovery Act and the Small Business Job Act that President Obama signed
into law we at SBA received some new tools to help put credit in the hands of good viable
small businesses. Whether that was raising our government guarantees so that banks and
credit unions would be more likely to lend in the worst lending environment since the
1930’s or the ability to waive our fee so that borrowers could keep more of their own
money in their pocket. Nikos, tell us a little bit about that loan
process of moving forward now from February ’09 to where we are today and the three successful
loans that you’ve had and going from 85 to 90 employees. Talk to us a little bit about
your lending experience. How long it took? If you had to do it all over again, what would
you wish you would have known? What would you like to tell a prospective borrower out
there? Nikos: From my experience I think going into
it aware of the process and the time frames. Also, just having a set that it is a process
that’s pretty involved and that you should be prepared to spend a lot of time meeting
the needs of the program and getting the paperwork and working in partnership with your lender.
I think as long as you go in expecting that you won’t get frustrated with the process.
You will go through the steps until it’s complete. Definitely working with a bank who I s experienced
in working with the SBA helps a lot. We’ve worked with a few different banks through
the process and certainly some of them have a more developed relationship and understanding
of the whole process that can help explain that to you ahead of time. Also really be
helpful in facilitating that [00:24:00] loan process.
Different levels of complexity are going to take different amounts of time. I think we’ve
gone between anywhere from 8 months to a year and a half, but a lot of that has to do with
getting to certain points within the project that are necessary to, for instance, identify
specifically the pieces of equipment that you’re going to be buying and some of those
things. It’s tied in the phase of where the project
itself is at, but generally it’s not overly burdensome. It’s just a process of dotting
the i’s and crossing the t’s and ultimately they really work to help you accomplish what
you set out to accomplish. In a lot of cases too the information they’re
looking for, more specific projection, some of the more specific information about the
equipment and the project and the appraisal process that you’re going through helps you
better understand even your own project. A lot of that detail may seem tedious at some
points. It overall, I think, even helps the business to gain a deeper understanding in
the process by going through all of that. Calvin: We didn’t ask you for your blood type.
Jeanne: Calvin, I�d like to just comment that.
Calvin: Yes, please. Jeanne: I think what Nikos explained was really
the process of a 504 loan, which is project finance largely. You’re doing the acquisition
building and equipping of anew business, a new project. Which the 504 program, the great
advantage of it, is that it enables 90% financing. When Nikos started his business in 2009 there
were not a lot of banks that would do 90% financing on commercial real estate and I
don�t know if there’s many banks that will do it today.
The 504 program really gives the advantage so that it helps the entrepreneur have about
10% into the deal, the banks can have 50% into the deal, and then the SBA [00:26:00]
subordinate at 40%, which makes the banks comfortable, it gives cash flow to the borrower
who’s trying to start the business, and we can get a project underway from soup to nuts.
From ground breaking all the way to opening the doors and having the equipment installed.
Our 7A program, different from 504, can be used everything from working capital, revolving
lines of credit, or just � I�m sorry when you don’t move in the offices of the SBA the
lights go out and our lights just went out. Calvin: We just want folks who are watching
to know that we’re doing our part to save money and [inaudible 00:26:34] in SBA offices.
So occasionally turn the lights off you’re saving two dollars. You were talking about
the 7A loan program. Jeanne: The 7A loan program and one of the
things to know about the 7A loan program is we have two different type of lenders. We
have our regular 7A lenders and then we have delegated lenders or preferred lenders like
Wells Fargo is a preferred lender. When you get into timing of loans, a preferred lender
can take all that information and make a loan decision and apply the SBA guarantee without
submitting it to the SBA. Typically that is a little bit faster process on the 7A side.
Borrowers should know when they’re looking at doing a loan, deciding if it’s 504 or whether
it’s going to be 7A, and what kind of financing they need. Then talk to a couple of banks
or talk to our district office staff or a resource partner to get some advice on what
type of lenders in their community have an appetite for their type of business. Not every
7A lender may have an interest. For example in brewery, whereas there maybe
others that are. We can direct to the lenders that are using our programs, there’s different
types of financing so that we cut down the lead time and again working with an experienced
SBA lender does help accelerate the process. Calvin: Dave, as were getting close to the
end of our show here, if you had a couple of words of wisdom [00:28:00] to somebody
who maybe watching right now. Who has been in business a couple of years, is thinking
about expanding whether it be for a product line or physical presence, what would be a
couple of words of wisdom that you might want to offer them?
Dave: Calvin, an experienced business owner can absolutely save cash flow and down payment
equity by using an SBA program. It’s all about us helping the borrower meet their financial
goals and preserving cash as best we can to help them structure a loan as best we can
for their needs. I would say that it goes back to the seeds
of credit. Coming into the bank prepared as Jeanne said, to know what they want for the
purpose of the loan, for the collateral that they can provide for the loan, and really
what we want to see from a bankers perspective is that businesses ability to repay the loan
over a period of time. The more prepared the customer is to help
us understand their vision and their dreams and how they’re going to pay the loan back,
that’s really the essence of what we want to know. I would encourage the borrower to
come in and talk to us. Talk to their banker, establish a relationship. We have a lot of
products that we can help them sell to them to help them grow their business, preserve
cash, and top help them mange all of the risk that they have as business owners.
Calvin: Great. Well Dave and Jeanne thank you for joining us from SBA headquarters in
Washington, DC. [00:30:00] Nikos thank you for joining us. I know you had to sneak a
way fro a few minutes. I think you had a batch of pale ale that needed your whole and undivided
attention so I�m glad that you could make it back with us. Thank you to those who are
watching. As I mentioned earlier this is National Small
Business week. To learn more you can go to sba.gov. The three previous Google Plus Hang
out on air are online as well, as well as all the events that have occurred those far
this week and that will be happening tomorrow as well. The total of all this hard work from
Nikos and all the lending that Wells Fargo has done and a great partner network out there
of other lenders and the hard work and grit of entrepreneurs across the US.
We have now had over 39 months in a row of month after month of positive job growth in
the US. Over 7 million private sector jobs have been created. That’s the quickest rate
of growth since 2005 in American manufacturing, which we’ve talked a lot about today on this
program. We’re seeing real [inaudible 00:31:02] jobs for the first time in American manufacturing
led largely by a smart long term decision to restructure the auto industry by the administration.
Real new net jobs manufacturing sector for the first time since the late 1990’s.
Our hats at the SBA are off. Hat tip to those entrepreneurs who are out there working hard,
making ends meet, and putting our friends and neighbors back to work in the process.
Thanks for joining and the sba.gov is a great resource going forward. Thank you very much.
Dave: Thank you.