SBA loan guarantee fuels dream

Some would come just for the day. Some would be guests overnight or longer.

It would, of course, be called Greendog, Nichols said. “And it would be all natural — food, toys, beds, everything.”

She found the spot she wanted, an old warehouse on Whitehall Street just north of I-20. But it was contingent on financing.

“I started paying rent on it,” she said. “I just didn’t want to lose it.”

She needed money to turn the 8,000-square-foot space into Greendog. She went to a local bank, filled out the paperwork and waited.

“Then, all of a sudden, they said they couldn’t do it. All of a sudden, no one was letting go of any money.”

It wasn’t just Nichols’ small Georgia bank. The financial markets were frozen. The chill was everywhere.

“Gosh, I was going to so many banks,” she said. “There was always some reason they didn’t give me money.”

That kind of rejection is frustrating, of course, for an entrepreneur. Repeated many thousands of times across the country, it is economic poison. And when credit was choked off to businesses large and small in 2008, the economy sputtered, stalled and threatened to crash.

Hoping to rev the economic engine, the government passed a huge stimulus package, which, among other things, ramped up programs that provide credit. Especially for small businesses, that aid was meant to fuel some growth until bankers went back to lending.

It was the Small Business Administration that helped Nichols get what she needed in the spring of 2009: the SBA backed a quarter-million-dollar loan from Atlanta-based Private Bank. About $7,000 in fees were waived, too, part of the 2009 stimulus law.

She hired a local architectural firm, Kronberg Wall, to design the space for Greendog.

That company, too, had an SBA connection. The architects were graduates of a management training program SBA recently set up to teach young firms the ins and outs of marketing, financing and planning. The eight-month course is free.

Dreams run on credit

But when it comes to business expansion, dreams are fueled by credit. To make hopes and plans real, the dreamer needs to borrow.

Even in good times, that obstacle can seem prohibitively high.

When the economy was growing and real estate was surging, banks were pretty loose with credit, amassing large, profitable portfolios of mortgage and construction loans while selling many of the loans up the line to bigger institutions.

Then the real estate bubble burst, the number of defaults surged and those portfolios looked more like dead weights hung around the necks of struggling swimmers.

Many banks have failed.

To right themselves, many lenders have avoided lending. Most figure to return to the game as the economy recovers — and that’s the catch. Because a typical recovery depends on lending.

That leaves a gap that the SBA means to fill, at least in part.

Loan guarantees

The agency has for years offered bankers guarantees on loans, and the 2009 stimulus bill sweetened the pot.

For loans of $150,000 or less, the agency could guarantee up to 85 percent. For larger loans, it could guarantee up to 75 percent.

Now, for loans under the program, the SBA can guarantee up to 90 percent.

With that kind of guarantee, a bank is a lot more likely to make a loan. Yet some lenders simply pass. After all, the bank would still face some risk of losing at least some money. In addition, lenders may chafe at the requirements imposed by the SBA, the rules for how the account will be administered, as well as the added paperwork.

Yet the thirst for credit is reflected in the recent spike in government-supported loans.

Greendog so far has three part-time employees. The space can handle up to 75 dogs, and if the business takes off, Nichols said, she will hire more help. The SBA loan doesn’t make people bring their dogs into Greendog, but it means that she’s ready if they do.

“It means making my dreams come to fruition,” she said. “It’s more than just a bank loan.”

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