Investing in Small Business

The Small Business Administration defines a small business as having fewer than 500 employees. In Maine, where I live, more than 95 percent of employers fit the bill. Since the Great Recession, small businesses nationwide have been responsible for the majority of new job creation, spurring economic growth. Small businesses across Maine (and the rest of the country) are just beginning to come out of hibernation. And it’s important that they receive the support they need to thrive and expand.

Since the economic turbulence that first hit at the end of 2007, businesses of all sizes have been slow to hire and make capital expenditures—even in a low interest rate environment. But that trend is starting to reverse. According to the SBA, small business indicators are improving, with lower bankruptcy levels, net employment gains, rising proprietors’ income, and an interest in capital investments. In Maine, we’re seeing business loans for vehicles, equipment and renovations.

This might seem ironic, given that signs point to a rate lift-off later this month. However, small businesses tend to be conservative. So an uptick in borrowing now is a positive sign that, like the Fed, business owners are seeing more favorable market conditions.

With small businesses representing the lion’s share of Maine’s economy (with similar patterns across the country), credit unions must do everything we can to encourage this growth. Very small businesses in particular—restaurants, garages, cleaning businesses—can benefit from developing a relationship with their credit unions and vice versa. They might not be immediate loan candidates, but think of it as an investment in the future.

Small business owners often don’t know where to turn for the planning advice that will ensure they put borrowed funds to work in the smartest ways. They’re looking for a financial partner to point them in the right direction. So, part of your investment might mean establishing relationships with outside resources— local colleges, SCORE, the Small Business Development Centers, and independent business counselors—who specialize in helping entrepreneurs with their business plans. With a solid footing under their business vision, small business owners become better lending candidates. 

Last year, a colleague of mine at Business Lending Solutions worked with a young man who had less-than-stellar credit, and had never owned a business. He had been employed by a company in the hospitality industry for approximately five years, and wished to purchase it (including real estate). My colleague spent six to 10 hours with this young man, guiding him through the process and directing him to resources that eventually helped him clean up his credit. The would-be entrepreneur then worked with a small business counselor to develop one of the best business plans I’ve seen in years. He ended up receiving offers from three separate financial institutions, now owns the company and has the ability to create and retain five jobs.

Or take the case of an existing company that had been in business for years and was experiencing some trouble in 2014. The owners were considering shutting down. They were older and saw the downturn as a good time to get out. They contacted Business Lending Solutions and were encouraged to look internally for someone to sell the business to (there was no real estate involved, just equipment and inventory). The company CFO emerged as a potential buyer. Lenders worked with him to do a small business loan and line of credit to purchase the existing equipment and inventory, as well as additional inventory. The business remains a going concern; no jobs were lost; and the former owners even ended up purchasing the land to lease back to the business at more favorable terms.

These are just two examples of how a little bit of time, mentoring and networking with small business resources can be an investment in a lifelong client relationship, helping the community and supporting the local economy at the same time. There is no time like the present to engage with those who have the potential to contribute to a healthy economy. When you take the time to offer guidance to these clients, everyone wins.

Will Hatt, SVP/chief operating officer at Business Lending Solutions, can be reached at whatt@mainebls.com.