Trend shows rebound in business sector
BY TOM BUSSELBERG
LAYTON — Following a plummet in applicants for small business loans, activity is now on the increase.
“We’re seeing a bigger percentage of approved loans,” said Cece Mitchell. “But businesses are running lean, being cautious in their expansion plans,”
Mitchell is the manager of Zions Bank’s U.S. Small Business Administration lending and spoke to members of the Davis Unified Economic Development group at the Layton City Center.
“These rates are so low I’m amazed people are not flocking to the doors,” Mitchell said.
Small Business Administration loans now average a 5.75-percent interest rate for a 10-year term.
That compares to 21-percent rates in the 1990s, she said.
Mitchell doesn’t predict that the rates will drop.
“With the federal (bank) rate at zero, I can’t see banks getting any more aggressive,” she said.
Beth Holbrook, director of the Zions Bank Business Resource Center, points to statewide successes.
“A lot of new businesses are developing,” she said, “and Utah is recognized as the No. 1 state for small business.”
Holbrook is a member of the Bountiful City Council.
There are several sources of financing small businesses can consider, Mitchell said.
Personal savings are the most common source used for loans by small businesses starting out. There are no hurdles to jump over for financing or interest rates or fees, she said.
Friends and relatives come up next on the list, but Mitchell urged those taking that route to get all agreements in writing in order to maintain a relationship no matter what happens to the business.
Suppliers, banks and various government programs are next, followed by investors, including venture capitalists.
Individual investors are generally looking for some “great idea or a tool that improves lives,” Mitchell said.
Venture capitalists are often attracted to bio-technology firms, she said.
A “slow and steady” path of growth characterizes most small businesses, she said.
When a lender considers an applicant, several factors are scrutinized: credit versus capital, and character and conditions of the industry cycles, among others, Mitchell said.
Cash flow and collateral are also key, particularly with unsecured lending hard to come by, she said.
“They need to see a business plan,” Mitchell said. “That helps a businessman look at his or her business in a systematic way.”
Such a plan can reasonably lay out a blueprint for three to five years. She advised including managers and other employees in the process.
Having a brief pitch ready in everyday terms is also vital.
“I’d rather know what an owner thinks” than read a 15-page summary contained in a business plan, she said.
Key questions that need to be asked are: Is there sufficient demand for the product? Is there a competitive advantage? Are growth projections realistic? How will you (a business owner) get the business to grow? How much equity does a business have? What is (an owner’s) business and personal credit history?
Costs to develop a product or for any construction and cost of supplies must be closely scrutinized, she said.
Financial statements, cash flow, profit and loss statements and a balance sheet must all be formulated when seeking a loan, Mitchell said.
Free services available from places such as the Small Business Development Center and Small Business Administration offices can be accessed locally.
Both entities have offices at North Front Business Resource Center in Kaysville.
For more information, visit utahsbdc.org/node/17 or call the Kaysville office of the Small Business Administration at 801-593-2202.
For Zions Bank, visit zionsbank.com/business or call 1-800-789-2265.