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Small business loan crunch still hobbles Tampa Bay entrepreneurs

Eileen Rodriguez and Jim Parrish are the director and deputy director, respectively, of the USF Small Business Development Center, which serves 10 counties. The pair counsel small businesses about financing and help them try to get federal loans.

SKIP O’ROURKE | Times

Eileen Rodriguez and Jim Parrish are the director and deputy director, respectively, of the USF Small Business Development Center, which serves 10 counties. The pair counsel small businesses about financing and help them try to get federal loans.

Eileen Rodriguez and Jim Parrish will be first to tell you the credit crunch afflicting small businesses since 2008 is still very much alive.

As regional director and deputy director, respectively, of USF's Small Business Development Center in downtown Tampa, the duo are charged with dispensing counseling to small businesses and helping them secure financing, particularly SBA loans.

Earlier this year, a federal government-funded program to shoulder 90 percent of the risk of SBA loans spurred banks to lend again. But when that temporary guarantee ended May 31, SBA lending fell off a cliff. The volume of SBA loans in June plummeted 75 percent to $637 million — $200 million less than January 2009, the worst lending month of the recession.

The government has temporarily restored the 90 percent guarantee until the end of the year. But it may be too little, too late. At the Small Business Development Center, they're still waiting for evidence that bank lending is coming back from the June plunge.

"All we have is anecdotal information from clients which isn't that encouraging," Parrish said. "(Banks) say they are loosening their policies, but at this stage we haven't seen it. … Our clients are still having a very difficult time finding financing."

Come February, Rodriguez reaches her 14th anniversary with the center and Parrish hits the 15-year mark. Plenty of time to hone some words of wisdom for small-business owners: Live within your means. Keep your cost controls in place once business picks up again.

And don't wait to seek help —like the business owner who came to the SBDC seeking counseling for her 110-employee firm on the day before the company was being forced to go to auction. "The sad thing is I could have saved 80 of them … but it was just too late," Parrish said.

Here are some highlights from a recent Times interview with the two small-business experts:

What is SBDC's mission?

Rodriguez: The Small Business Development Center is a national network. In Florida, we have our headquarters, if you will, at the University of West Florida in Pensacola. We have 33 offices in the entire state. The office here at USF covers 10 counties. Basically, what we do is assist entrepreneurs by delivering low-cost seminars and free one-on-one confidential counseling.

Has your focus changed because of the recession?

Rodriguez: No, we've just gotten busier. … Because of the recession, businesses that have been very solid are on somewhat shaky ground, so they're using us for the very first time. They really thought they never needed us and perhaps now they're seeing there's something we can offer to help them weather the storm.

What is the biggest need small businesses have?

Parrish: Primarily one-on-one counseling (for) cash-flow issues and financing. Sometimes cash flow issues are driven by: "We're just not selling enough" or "We had to discount our pricing in order to move products and services." In some cases it's a situation where, truthfully, in good times the company probably didn't operate as lean as it should have. In a recession, those companies that were marginally profitable are now losing money and worried about keeping their doors open.

Are you finding business owners come in with a salvageable operation or are they on the verge of going out of business?

Rodriguez: I think a lot of times small-business owners will unfortunately wait until it's almost too late to get help. "Just one more month and we'll be out of this." Then when they do come in, it's almost to the point there's not much we can do. I wish more of them would come in on a timely basis.

Recession aside, your organization is expanding in the region.

Rodriguez: Yes, we just opened an office in Hernando County, and that's the first time we've had a physical presence in Hernando. … We also have a part-time office in Pasco, of course a full-time office in Hillsborough. We just collaborated with Pinellas Economic Development and now have a full-blown office in Pinellas. We have one office in Highlands County that serves Highlands, Hardee and DeSoto. We have an office in Sarasota that covers Sarasota and Manatee counties. And we have an office in Polk.

We have 31 staff for our entire region and that includes our sub-contracts. Not everyone is a USF employee.

And has your revenue stream remained constant?

Rodriguez: We receive a little over $2 million in funding. Thankfully, our federal funding at this point has not been cut. Half of my budget is federal, from the Small Business Administration. But the grant that we get from the SBA is a matching grant, so we have to find matching funds in the community, and that's the hard part. Right now our biggest player is the University of South Florida. We also get money from the Hernando Chamber of Commerce, from the University of South Florida in St. Petersburg and from Highlands EDC.

Are there any signs small-business lending is coming back?

Parrish: That's really hard to say right now. (Earlier this year) SBA lending had grown substantially where it was 15 percent of all lending. When the SBA dropped the 90 percent guarantee … it tanked. It went down 74 percent. As of October, they returned to the 90 percent but it will only remain there until the end of the year. We don't have any numbers yet in terms of loan production. All we have is anecdotal evidence … but we haven't seen a marked increase.

So if lending is tough, how do you get companies back on the right path?

Rodriguez: We have a number of companies not operating efficiently enough.

We look at their business and say, "You know what? You're paying these people way too much money. You're spreading yourself too thin."

They tend to tighten their belt and do what they need to cut their expenses. Then they start making a profit again, and after three or four months, they forget the reason why they're making a profit is because they tightened their belt and they start spending again.

Parrish: The interesting thing is we've had some clients who have gone through and listened and they're making more money now than they ever had.

Any other advice?

Parrish: It's about (finding) additional revenue streams. If all I'm going to do is own a restaurant and sell food, I'm going to do the same thing and rely on consumer spending to go up dramatically. Then it's going to be a while before things will come back. What I've got to do is go out and find new revenue streams. In some cases, that's governmental spending in terms of the stimulus package.

Rodriguez: One of my specialties is international trade, and the president has been going on this new national exports initiative. Perhaps your traditional market is not conducive to doing more business now because of the crunch. For businesses that want to expand internationally, now is the time.

We've had a surge of private equity investors searching for Florida opportunities. Do you send customers their way?

Parrish: We help our clients attempt to navigate that maze. Some of our clients are technology-based, which tend to be more attractive in the equity markets.

But the private equity people are looking for people doing $5 million to $10 million that have the potential to do $100 million. Most of our clients tend to be seeking under $1 million (in financing), unless they're going to buy a building and then there are a number of loan programs available.

A lot of our clients are looking for individuals to invest their own money, sometimes referred to as angel investors. I don't like to use that term. It kind of implies manna from heaven. This is not about benevolence. This is about people wanting to make some money.

Jeff Harrington can be reached at jharrington@sptimes.com.

To contact USF's Small Business Development Center, call (813) 905-5800 or go online at sbdctampabay.com.

Small business loan crunch still hobbles Tampa Bay entrepreneurs 11/14/10 [Last modified: Monday, November 15, 2010 2:41pm]
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