Terms for loans becoming stricter
Event speakers share tips about lending options
Larry Neu, owner of Northwest Diesel Sales and Service, has a chance to buy the land his business has rented for the past 15 years.
He might even expand.
But none of that will happen if Neu can’t get a business loan.
“It’s one of those things, you don’t know what’s going on anymore,” he said.
Neu said he was thankful he cleared up some of his confusion at the Craig/Moffat Economic Development Partnership event – titled “Where’s the Money NOW?” – on Wednesday afternoon at the Moffat County Courthouse.
Dave Fleming, Yampa Valley Bank Craig president, gave a presentation about what local residents can expect when they walk into a local bank seeking a loan.
“The information he gave on the criteria they use now, that was good,” Neu said. “I’m going to use some of that.”
Fleming was one of four speakers who discussed how businesses can get loans, grants and other financing options while the global credit market reorganizes itself.
First off, businesses need to bring a lot more information than before.
“There is less reliance on historical income from the last six months to a year,” Fleming said. “That’s no longer good enough. We want to look at historical information, (but) because of the instability of the markets, you have to be able to come in and present projected cash flows for the year, even up to the next three years.”
Loan applicants also have to be able to show how they plan to survive and pay their debt during the recession.
“You have to be able to be out in front of things in today’s world,” Fleming said. “You have to be able to say, ‘Who are my best customers? How am I going to be able to serve them now that the economy is down?'”
The changes in lending practices are the result of two things, Fleming said: the recession, and a demand from federal regulators that banks tighten their credit reviews.
“They have a pretty big hammer,” he said about regulators. “They can state their case pretty well.”
The other three presenters all had tips about how businesses can find financial assistance outside of the banks.
Mark Buschenfeldt, business development project manager for the Colorado Office of Economic Development and International Trade, said the state Legislature approved several new incentive programs, such as job creation tax breaks, worker training and loan guarantees.
“Obviously, when it comes to incentives, Colorado is a little lean when compared to some of our competitor states,” Buschenfeldt said.
One example he gave was the Colorado Credit Reserve Program, through which the state will use $2.5 million to guarantee private loans to small businesses.
Buschenfeldt also recommended business owners look at the various available programs listed on two Web sites, http://www.advancecolorado.com, which has state-based programs, and http://colorado.gov/recovery, which catalogs the roughly $3.5 billion in federal stimulus funds bound for the state.
The U.S. Department of Agriculture also offers several loan, grant and financing programs.
Pattie Snidow, USDA Rural Development west area director, said the agency spent $419 million in 2008 in Colorado and is on pace to spend more this year.
The agency provided $13 million in loan guarantees for business and industry in 2008, Snidow said, and already has passed that amount this year.
“The stimulus has added funding to our existing programs,” she said. “We have more money to spread around now.”
For those businesses that don’t qualify for government financing and can’t get a bank loan, the Northwest Loan Fund may provide an answer.
Banks sometimes have a hard time loaning money to startups, especially with new credit checks that require three years of business history, said June Walters, Loan Fund program director.
The Loan Fund has helped several successful business get off the ground, she added, including Action Drain in Craig.
Although some of his financing questions were cleared up, Neu came to the meeting with other concerns that weren’t settled. Business depends on more than financing, he said, and one of those things is customers.
Neu’s company is heavily tied to the energy industry, and the way oil and gas companies have swiftly pulled out of Colorado has not been easy.
Neu found himself reassured, however, by the comments of state Sen. Al White, R-Hayden, and Rep. Randy Baumgardner, R-Hot Sulphur Springs, who both spoke Wednesday.
“With the implementation of the oil and gas regulations, (the industry) has no incentive to go and drill out there,” Baumgardner said.
He and White said they voted against the regulations this year.
“I’m glad to hear my legislators are on track with what I want there to be in Northwest Colorado,” Neu said. “They need to get this energy and drilling production back. There are a lot of jobs that depend on it.”
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