Tracy: Bob, you are the small business expert of the world, so give us a State of the Union on small business lending?
Coleman: I watched the State of the Union speech last night, and reporting back to you, I got nothing. He mentioned "small business" once in his speech, once.
Tracy: And isn't it funny Bob, because all along we have heard him say, 'we have to help our small businesses, we have to get banks to lend to small businesses,' and then there is no mention of it whatsoever in his speech. Where does that leave us?
Coleman: What we have all realized, is whether we are Republican, Democrat, or Independent, we want to get the recovery going. How are we going to do that? Small business creates 65% of the jobs in this country. That is where the jobs are created. We need to get people back to work and people want to get back to work, so it is embarrassing that this topic got short-changed last night.
Tracy: So, are you seeing any green shoots out there?
Coleman: Last time we talked, things were pretty dismal. But, now you are seeing deals getting done. Yesterday we did a webinar for the hotel industry, and what they are seeing is transactions being made. Mom and Pop's are buying these hotels, they're buying these franchises, and there is a lot of activity in that. It is very difficult for our small business bankers to lend money today, so the banks need to have some sort of inducement to reduce the risk. 90% of the deals beneath $5 million were done with an SBA guaranty. So, deals are being done, and that is great news.
Tracy: That is great news. So, if I am a small business and I am looking for money, should I contact the SBA?
Coleman: Talk to your bank. You won't even deal with the SBA or have to talk to the government, your banker does all of the paperwork for you. What do all of the following have in common: Fannie Mae, Freddie Mac, AIG, GM, Chrysler? They all needed a bailout. The Small Business Administration did not need a bail out from the American taxpayer. The program is paid for by the fees from the lender and the borrower, and creates tens of thousands of businesses which in turn creates hundreds of thousands of jobs.
Tracy: The community bankers are back in vogue again, aren't they? The big banks are so hard to muddle through. But, is the community banker in the position now to make a loan to someone they know?
Coleman: Absolutely. Community banks are where deals are being done. They know you, they know the community, they know the project; I'm not dissing the large boys, but they certainly have their problems. If you look at the small business rankings, the community banks are really stepping up and filling that niche for Main Street.
Tracy: You brought up that the SBA is doing great and didn't need a bailout, but there have to be some industries that are struggling to get financing, right? You said hotel financing is doing OK, is there any other industry you're seeing that is having a tougher time getting along?
Coleman: The answer to that is, 'Everything is tough.' But, the good news is, and what we need to focus on, is that deals are being done. Banks aren't saying anymore, 'we're not going to do restaurants, because restaurants are risky.' Restaurants are the number one source of small business loans. If you have a good plan, a good team, a good concept, and good equity, you can get financing.
Tracy: Is the application process different now? Back in the day you had to be able to show a source of revenue, but nobody has that anymore.
Coleman: You are right, it is tough. Bankers now are starting to go old school. Every junior banker, and I learned this many years ago, learns the 'Five C's.' Nowadays, Character is the first C. Cash Flow is down because business is down, Collateral is down because our house appraisals have diminished. So, the bankers are looking at if you have the ability to execute the business plan and pay them back. If they finance a restaurant, they don't want restaurant equipment back, they want cash.
Tracy: It is so good to see you, and I hope you come back.
Coleman: Absolutely Tracy, thank you.
Tracy: Like I said, Bob is the small business guru de jour. Check out his new book and his website www.colemanpublishing.com. Bob is the best, he knows everything there is to know about small businesses. Check out his book, 'Money, Money, Everywhere -- But Not a Drop for Main Street.'
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