Lexington, KY -
After six months of trying to get his no-contract-required wireless retail business off the ground, Michael Fields could see the loan rejections coming.
"I went through the drill," said Fields, who decided to launch his own business venture after being laid off from AT&T in 2008. "I got up every morning, went to banks and got denied."
That was before Fields started working with Community Ventures Corporation (CVC). Now, thanks in part to two microloans obtained through the CVC, Fields' Georgetown retail store, No Strings Wireless, will celebrate its second anniversary in July.
"I really didn't know what the banks were looking for," Fields said. "CVC helped me understand, learn and write the financials that the banks want to see."
As a tough economy has tightened available credit for many small business owners like Fields, CVC has stepped in to fill the void. In a typical year, the organization averages about 60 to 80 SBA microloans, which are capped at $35,000. In 2009, that number rose to 270, representing more than 12 percent of all loans issued in this category nationwide.
"I think that points to the entrepreneurial spirit in Kentucky," said Kevin R. Smith, president and CEO of Community Ventures Corporation. "It also points to the economy and the tightening of credit with the banks. Ö The smaller, high-risk loans aren't easy for the banks to make anymore."
As a result, Community Ventures Corporation was recognized as Kentucky's 2009 SBA Lender of the Year, an honor the CVC has claimed nine times in the last 11 years.
"This year, when you take our loan activity Ö and you compare it to all of last year, both in number of loans and dollar amounts, we are exceeding last year," said Phil Danhauer, chief of the finance division of the U.S. Small Business Administration's Kentucky district office. "We use (CVC) as a model of success for our microlenders, Ö both here in Kentucky and throughout the United States."
In addition to the Lender of the Year honors, the SBA district office also recognized Emmanuel Smith, CVC's director of business development for Lexington, as Kentucky's All Star Lender of the Year.
Smith, who is in his third year of employment with the CVC, said that a lack of necessary funding is one of the biggest challenges facing today's small businesses. Building personal relationships with business owners has been an essential component of his success.
"I just don't treat them as a client," Emmanuel Smith said. "I try to get to know them as a person."
That close relationship can be helpful, he said, especially in consideration of the steep learning curve that can be required for today's small business owners, including those with experience and those new to business ownership.
"A lot of small business owners think they understand the market, but they don't," Emmanuel Smith said.
His clients said they appreciate his efforts to understand where they are coming from, along with his straightforward attitude.
"You can talk to him candidly," Fields said. "It's nice when you're at this point and you can talk to someone as a real person."
The training and technical assistance offered by CVC is one of the strategies the organization uses to help manage its risk, Kevin Smith said.
That kind of guidance has helped small business owners Russell Cantrell and Robert Miller take their barbecue business, Stop and Go Barbecue and Catering, from the backyard to a Richmond restaurant location.
Cantrell and Miller, who funded the venture primarily with their own money, secured roughly 10 percent of their initial capital through the CVC. They also benefited from classes and business training offered by the organization, Miller said.
Stop and Go has weathered the tough economy by diversifying into catering and delivery, and they have expanded their menu of pulled pork, beef brisket and ribs with lighter fare such as smoked turkey, Miller and Cantrell said. They hope eventually to expand their location from its current 15 seats up to about 30.
"No bank is helping small businesses these days," Cantrell said. "That's why Community Ventures has taken off."
The increase in microloans has required the CVC to take on more risk than usual, Kevin Smith said. While the organization has tightened its own requirements a bit, Smith said its board also has recognized the need to fill a crucial financing gap, in spite of the added uncertainty.
"It's times like these that organizations like ours are made for," he added. "If we don't step up to the plate, no one else can."
And the microloans are not the only financing tools available through the CVC, Kevin Smith said. The organization offers funding options at various levels, including the SBA 504 program, which offers loans up to $2 million and New Markets Tax Credits that can provide funding of up to $20 million.
One of the worst mistakes that can be made, according to Kevin Smith, is to get an entrepreneur into business and then undercapitalize them. However, he pointed out, most entrepreneurs who walk through the CVC's doors, especially those without business plans, ask for too much money initially. Working with them to set realistic expectations and get a satisfactory business plan in place is the organization's main mission; the loan programs are simply a tool used to get them there.
"It's very much a negotiation all the way through, including the loan," he said.
Overall, Kevin Smith said, the central Kentucky market is still ripe for entrepreneurship. One upside of the current economic situation has been that fewer business owners are walking through their doors with the burden of heavy credit card debt used to finance their businesses.
"This past year has weeded out the credit bandits," Kevin Smith said.
Fields, who hopes one day to take his wireless retail concept nationwide, recommends that new business owners develop a thick skin very quickly.
"Whatever it was that made you want to start the business, hold onto that," Fields said, because small business owners typically meet a lot of doubt and adversity along the way. "I had a lot of people telling me this wasn't going to happen."