Good news has been sparse in the last couple of years. There has been some stories of recovery, a return to profits for some big corporations, but not much for small business. That good news comes from multinationals and investment banks, while we hope for the trickle-down to our part of the world. But a couple of news stories on Reuters yesterday gave me my first real feeling of turning a corner.
The commercial vacancy list has possibly peaked - with some movement seen in small apartments according to the National Association of Realtors. Currently, Retail space remains sluggish with the smallest decline in vacancies: one tenth of one percent this year. The good news to pull from this news wreckage, is that while the movement was tiny, nearly imperceptible, it is movement in the right direction, which may be an indicator that the bottom of the decline has been reached. Time to look for those tenants and buyers who will be taking up space in the next few years. How do we know business space will be taken? Because the other indicator to show signs of life are loans.
Small business loans are rising - fast. Business loans are the real sign of growth, both for start ups and for existing businesses finally ready to expand. The feeling of uncertainty that pervades the American landscape has prevented growth and hiring, even for businesses that had weathered this storm. Paynet Inc. small business lending index released a report at the beginning of December, showing an increase in borrowing by US businesses. It’s not a small increase, either - 19 percent over last year, and it’s been climbing for three months in a row so this isn’t simply a short term effect from recent actions taken by the Federal Reserve or the election results.
Since 2007 the small business lending rate has been higher at smaller, local banks than at the big players according to Aite Group, a Boston banking consultancy. These local players have a great deal more latitude in loan approval, basing decisions on face-to-face meetings and a knowledge of the area business climate, rather than a formulaic criteria used by the large, multinational banks.
The index does not show what this lending is for, but it must be assumed that some or most of these small businesses are borrowing to expand, acquire capital equipment, raw materials, and with that come the inevitable hiring and expansion. The trend so far has been to delay hiring new employees until the strain on the existing workforce becomes unbearable, but the hiring and growth will come, and they will need room to work. Additionally, the same source showed that existing companies who already had loans were catching up on their payments - delinquencies are slowly but steadily falling.
With all these business expansion loans, which ones will be looking for additional commercial space? Which ones need retail locations? Internet research can give you broad trends for future planning, but it’s difficult to get that kind of fine-grain detail from reports. To capitalize on the sudden uptick in business lending, you should know someone on the inside.
It’s time to put that local network to real use, making friends and alliances in key places, to benefit your livelihood. Depending where you are, you may have a lot of options for Banks. If your bank is a National / Global / Multinational bank, it may not be easy making friends with the staff, as so often those lending decisions are made far from your local branch office in a strip mall or grocery store. But it’s still worth trying.
I don’t want to discourage looking to the Big Banks for help, but it may be worth your time to get to know your local, smaller bank. Here in Houston, I have my choice of B of A, Wells Fargo, and Chase for my banking needs. All very convenient for online purchases, transfers, and nifty rewards programs, but it isn’t the only game in town. There is also Tradition Bank, with 6 locations in the West Houston Area, so small it’s not on Chase’s radar. I bank at the main branch, where I can see the Vice President’s office from the lobby - that’s where the loan decision is made, not in a data bank in Kansas, but right here.
Many small businesses turn to smaller banks for their business loans - not only for a more personal experience, but also because some may not be quick to forgive taking overt risks in the recent past. Tradition Bank, and the thousands like it, did not receive TARP funds, no taxpayer bailed them out, and they have proven a stability that the larger banks cannot provide. Also, the loan officers will be in the same area code as you, so they will know a lot more about starting a business in the area.
Use online social networking, or even an old-fashioned face to face networking event, to get closer to some bank employees, and see if you can’t find a way to be the first one knocking on the door of a company about to be approved for their expansion loan. We aren’t totally out of the woods yet, but this is a sign of progress. With those record levels of vacancy, these first tenants are going to have a lot of choices. Doing this little bit of extra work may make a huge difference on your vacancy rate.
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