BIZ VOICE: Banking on small guys

Given today’s economic instability —- and all the talk about Wall Street vs. Main Street —- it may seem a risky time for financial institutions to extend credit to entrepreneurs to help them start up and keep their small businesses growing.

Making credit available to entrepreneurs is more important now than at almost any time before, because small businesses are the lifeblood of the economy, and they have led our country out of every major downturn in our history.

Small businesses, defined as having fewer than 500 employees, generate nearly 45 percent of total U.S. private payroll, employ about half of all private-sector employees and created 60 percent to 80 percent of net new jobs annually over the last decade, according to the U.S. Small Business Administration.

Georgia alone is home to more than 859,000 small businesses.

To be sure, many banks are tightening their lending standards amid bailouts, industry consolidation and a decline in the creditworthiness of some borrowers. But research from the National Federation of Independent Businesses, cited by the SBA, showed that only 3 percent of small-business owners said cost and availability of credit was their biggest concern. In 1982, that figure was a record 37 percent.

Most active in the small-business lending arena are the nation’s healthy community banks. They’re the most hospitable to small businesses, filling in service gaps left after major bank consolidations and mergers. They believe in entrepreneurship.

What helps firm up that belief —- and makes small business an even safer proposition —- is the SBA’s guarantee program.

The SBA, contrary to popular opinion, does not issue its own loans for entrepreneurs. The agency backs up certain loans issued by partnering banks, assuring the lender that in the event the borrower defaults on the loan the government will reimburse a set portion of the loan.

To apply for an SBA-backed loan, a borrower is most often required to show the lender:

> a business plan;

> the availability of collateral to secure the loan;

> an ability to repay the loan from the cash flow of the business;

> good character;

> management capability; and

> proof of the owner’s own equity contribution.

These loans —- often offering a lower down payment, longer terms and amortizations, competitive rates and improved cash flow compared to other lending vehicles —- are typically used to refinance, renovate, complete an acquisition, buy a franchise, fund inventory or provide working capital.

That’s exactly the kind of help today’s small businesses need, and today’s healthy community banks are poised to provide. To do otherwise —- shutting down small-business lending to hide fearfully in the vault until the economic crisis passes —- would do a disservice to the country’s thousands of entrepreneurs who stand ready to breathe new life into the economy. They’re the ones who, with a bank’s financial kick-start, can help the nation weather this economic crisis.

> Chuck Lewis is president and CEO of One Georgia Bank. Lewis serves on the board of trustees of the Georgia Council on Economic Education; Communities in Schools of Georgia; the Georgia Chamber of Commerce; the New Century Forum at the Commerce Club (co-founder and past president); the Commerce Club Operating Board; the Metropolitan YMCA board of directors; and Midtown Alliance board of directors.