Small-business loans back on the upswing in the Portland area
Published: Monday, August 29, 2011, 9:20 PM Updated: Tuesday, August 30, 2011, 9:26 AM
Space and time were running short last fall at Isite Design's headquarters in Old Town. The growing company needed more space for new workers and its lease was coming due.
The digital strategy and design agency decided to buy permanent digs. "We're expanding and we're going to continue to expand," said chief operating officer Kevin Mackie as he stood in the Northwest Portland warehouse that will become the company's headquarters.
To finance the deal, Wells Fargo lenders helped the company land a $3 million loan backed by the Small Business Administration.
It's the kind of strategic move companies across the region make all the time -- but only if they have access to capital. Credit to small businesses has been in short supply over the last couple of years, since the beginning of a recession blamed in part on lax bank lending standards.
In the Portland area, at least, things seem to be opening back up. Small businesses are borrowing more, and banks are approving larger applications.
The average loan backed by the SBA's most popular program has grown nearly 70 percent this fiscal year, according to the office's most recent statistics. Borrowers are walking out the door with approvals averaging $330,000 this year, up from $195,000 the previous year, which ended in September 2010.
The numbers are driven up in part by high-dollar real estate and equipment purchases, said Tom Taylor, Wells Fargo regional vice president in charge of its business banking division.
"Businesses are starting to feel better about expansion," he said. "For the last three or four years, business owners didn't feel that great about expanding."
The 7(a) loan, the SBA's most broad and popular option, helps finance expenses up to $5 million, such as expansion, property and working capital. The program backs between 75 and 85 percent of that risk up to $3.75 million. Borrowers, in turn, get lower rates and longer terms than the conventional market offers.
Banks see the SBA as a way to backstop their risk in a flatlining economy. Congress views it as a vehicle to drive spending. Among other provisions, the Small Business Jobs Act, passed in September, increased 7(a) loan limits from $2 million to $5 million.
The change has opened a vein of financing for companies considered safer bets: businesses with steady revenue, growth and vision. Those borrowers are taking advantage of low labor and property costs and lining up larger loans, said Jennifer Baker, spokesperson for the Portland district SBA office.
"There are definitely a lot of opportunities that stemmed from the economic downturn," Baker said.
Demand for small business loans started picking up in October, said Dan Mogck, KeyBank's vice president of business banking in the Portland district. The SBA has backed a quarter of its regional business loans this year, he said, a higher than usual share. The bank added a second SBA specialist to its Portland market handle the demand.
"In the economic environment we're in," Mogck said, "SBA becomes a real viable option."
KeyBank's 7(a) loan volume jumped from $3.9 million last year to $15.2 million through the first 10 months of the fiscal year. The loans went to 74 borrowers.In all, banks have approved 638 loans worth a total $210.6 million in the region. That total is on track to beat the previous three years' tallies.
Isite Design expects to grow 20 percent this year, said Mackie, as he walked through the shell of its future home, on Northwest Overton Street near 22nd Avenue. The firm, which has offices in Boston and Los Angeles, brought in $6.9 million in revenue in 2010, he said.
The company plans to hire 10 people in the next year, nearly filling the new 18,000-square-foot space. The 45 current Portland employees are on track to move into the new space in November.
Mackie credited the SBA's 25-year payback terms with making the purchase fit into the company's long-term financial model. The company also secured a $100,000 loan from the Portland Development commission in June.
"Loans are never pain-free, but I can't imagine it going better for us," Mackie said.
This story reflects a correction that will be published in Tuesday's paper. Kevin Mackie serves as the chief operating officer of Isite Design. A story in Monday's paper misstated his job title.
--Molly Young; Twitter
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