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Banking & Finance

Small Businesses Find Lending Niches

By Jenny Callison, posted Oct 4, 2019
Michael Tuczynski knows about small business lending. He was an SBA loan specialist during his 15-year banking career. When Tuczynski and his wife purchased Southeastern Pet Cremation in 2014, he used an SBA 7(a) loan to finance the transaction.
 
Last year, the couple was ready to purchase the business’s building and surrounding property they had been renting from the previous owner. Tuczynski again relied on an SBA loan, but this time went to a nonprofit lender, Self-Help Credit Union.
 
“I got a better rate and better terms: a percentage-point or more lower than what the banks offered, and I could go longer,” he said. "Usually [a 504 loan] is about 10-year term, but Self-Help could go up to 20 years, and there are no prepayment penalties.”
 
Self-Help’s small business and nonprofit clients “come in all shapes and sizes, often with unconventional business models,” said Jenny Shields, the credit union’s spokeswoman.
 
“Examples of our borrowers include cooperatives, solar and biofuel providers, green businesses, churches and social service organizations. We’re proud that 40% of our business lending has been to woman-owned enterprises,” Shields said.
 
“The small businesses and entrepreneurs we serve typically don’t come to us with high profit margins or valuable collateral, and that’s okay,” she added. “We work closely with our borrowers to make sure they have a solid business plan. For borrowers who are not quite ready, we can offer free resources and advice to lay the groundwork for their venture.”
 
Self-Help Ventures Fund, the SBA 504 program that allowed Tuczynski to purchase his business facilities, is separate from the credit union’s other SBA lending program, said Tracy Ward, who directs the program.
 
“We typically give more technical assistance than the traditional lender,” she said. “We are a nonprofit, and that gives us more flexibility. We require less of a down payment and can offer a lower [interest] rate that is fixed for the life of the loan, which is usually 20 to 25 years. That’s a real benefit to the borrower.”
 
Raleigh-based Coastal Credit Union lends to small business owners in North Carolina, South Carolina and Virginia, although business loan officer Jonathan Kalleberg said the institution tends to focus on businesses in the Triangle.
 
“We’ve done some real estate lending in the Wilmington area,” Kalleberg said, adding that small business owners with a good financial track record are eligible for CCU loans of up to $50,000. The money can be used to buy equipment, acquire inventory or expand operations.
 
“We can technically go up to a $100,000 unsecured line of credit,” he said.
 
Carolina Small Business Development Fund provides loans of up to $250,000 for businesses in a variety of industries. Interest rates vary from 8% to 11%, and business owners must submit a package with financial statements, business plan and management resumes.
 
“Community Advantage loans are typically under $250,000, and they are a subset of the SBA’s 7(a) program. An average loan is $90,000 to $100,000, and we lend all over the state,” said Joe Battle, the Ra leigh-based nonprofit organization’s vice president of business development.
 
While the center uses the same criteria for borrowers as do traditional lenders, it will work with potential borrowers who may have circumstances that disqualify them at other lending institutions.
 
“If we can get comfortable [with the borrower’s situation], we will dig a little deeper than traditional lenders,” Battle said. “One thing that makes us different, too, is we lend to existing businesses and startups. With startups we have more stringent criteria.
 
“We lend to anybody, but part of our mission is to lend to folks who have had challenges in the past: veterans, women, people of color, rural businesses, Latino business owners. We do active outreach to those business communities that have been excluded in the past,” he added.
 
Carolina Small Business Development Fund also partners with YWCA Lower Cape Fear in Wilmington to help individuals seeking to start or expand a small business in the region. The program, called Coastal Women’s Ventures, is a onestop shop that provides technical assistance to aspiring women entrepreneurs and helps them gain access to financing. Battle said CWV is in the process of being renewed.
 
N.C. Rural Center provides small business funding to businesses in rural areas not served by traditional lenders. Small business owners in rural areas can get funding up to $50,000 for borrowers with strong business plans and financial projections.
 
Its subsidiary, Thread Capital, operates in all North Carolina counties and provides access to capital for growing businesses or businesses that have been affected by natural disasters. Thread’s lending limit for regular loans is $50,000; for disaster- related loans it can lend up to $250,000.
 
“We still have funds available for Hurricane Florence and Hurricane Dorian-related disaster recovery,” said Shannon O’Shea, Thread’s senior program manager.
 
Thread can connect borrowers with larger needs with lenders within its network for loans up to $5 million, according to O’Shea. It also offers coaching and connections to ensure that its borrowers anticipate and address obstacles and seize opportunities.
 
Early-stage businesses can find help at Fayetteville-based Center for Economic Empowerment & Development, which supports access to capital for inexperienced and less-qualified small business borrowers, according to its website. It will lend between $2,500 and $200,000.
 
The center, a 501(c)(3) organization, works with entrepreneurs in Southeastern North Carolina who need support to turn their marketable idea into a business and get that business open, said Stewart Walters, a business counselor and loan program coordinator.
 
“We work with small businesses that are prebankable,” Walters said. “If borrowers need a small loan we can use our funds. A typical loan is $30,000 to $50,000. Or we can help them find another appropriate lending source. We help them put their loan package together.”
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