Across the state, the past several years have been filled with stories of job loss, downsizing, layoffs — and most recently, the fiscal cliff. But is business in Kentucky really in trouble?
In reality, small business in Kentucky appears to be alive and well. In fiscal year 2011, the Small Business Administration (SBA) doled out $200 million in loans in Kentucky. In fiscal year 2012, the SBA achieved a record-breaking 504 loans in Kentucky, with 60 of those loans worth more than $46 million. In the first two months of fiscal year 2013, there was already a 30 percent increase in loans over last year.
Cassius Butts, SBA regional administrator, identified a few reasons for the dramatic increase. “A lot of people were laid off, or their jobs were moved. When the 9-to-5 job isn’t available, starting a small business becomes an option. You rely on your own talent. You rely on something you’ve wanted to do for years but kept putting off. This entrepreneurial mindset has been flourishing across the country and across Kentucky,” Butts said.
The SBA loan figures should be a positive sign for the Kentucky economy, considering that 99.4 percent of businesses in the United States are classified as small businesses. You may think a small business only refers to that independent dress shop down the street or your neighborhood dentist office. The Small Business Administration defines a small business as one that is independently owned and operated, is organized for profit and is not dominant in its field. Depending on the industry, eligibility is based on the average number of employees or sales volume, and generally that means 500 employees or less, with sales volume not exceeding $2.5 million.
Brad Thomas, branch manager of the Small Business Services Division in the Kentucky Cabinet for Economic Development, said small business in Kentucky is indeed looking up.
“We are seeing a big uptick now, based on some of the programs that help put dollars in these small businesses through either loans or credit. Small business is what really drives our economy. It’s opportunities through SBA-funded programs and the Kentucky Small Business Credit Initiative that are helping make a difference,” Thomas said.
According to the Kentucky Cabinet for Economic Development, Kentucky’s net job growth from September 2011 to September 2012 was 2.6 percent, the second best in the nation, behind only North Dakota’s 5.6 percent growth. Kentucky’s job growth was more than double the Kentucky competitor state average of 1.1 percent. Kentucky’s competitor states, listed in order of ranking, include Indiana, Ohio, South Carolina, Georgia, Virginia, Illinois, North Carolina, Tennessee, Alabama, Missouri, Mississippi and West Virginia.
Thomas said one aspect of that growth can be attributed to a rise in Kentucky exports. The Kentucky Cabinet for Economic Development is making export opportunities one of its chief initiatives.
Additional numbers from the Kentucky Cabinet for Economic Development, show Kentucky’s exports grew 9.9 percent for the first 10 months of 2012, to a record $18.4 billion, eclipsing the former mark set in the first 10 months of 2011. Export shipments for all of 2011 totaled $20.1 billion, $740 million more than in 2010. As the exporting numbers grow, Canada continues as Kentucky’s largest market, importing $6.5 billion or 32.2 percent of Kentucky’s total exports in 2011. Canada was followed by the United Kingdom, $1.5 billion; Mexico, $1.5 billion; Japan, $1.1 billion; and Brazil rounding out the top five at $997 million. In 2011, exports added $4.7 billion to the commonwealth’s gross domestic product and directly created 47,000 jobs. Kentucky ranks 19th in the nation in total exports and is ranked 11th in United States in terms of exportation on a per capita basis.
“We are seeing a lot of Kentucky businesses get into the exporting world. When you get into exporting, you’re diversifying the areas that the economy can help you,” Thomas said.
Of course increasing sales with diversification can mean the need for additional funding. The majority of Small Business Administration loans in Kentucky are managed by Community Trust Bank, headquartered in Pikeville, Ky. Terry Spears is a small-business banking officer for Community Trust.
“The SBA products fit our customer base, which is generally small businesses. Our management has always been an advocate of SBA and USDA lending, so we have a long history. Folks know they can come to us for those types of loans,” Spears said.
Spears added that the SBA has made some positive changes in recent years to help out small businesses during difficult economic times.
“I think it is fair to say that the SBA has made a concerted effort to make their loan programs more user friendly for both the banks and the borrowers over the last few years. There have been a lot of small businesses looking to refinance to take advantage of the current low interest rates,” said Spears. “During the recession, when it was hard for small businesses to get credit, some business owners used credit cards or received loans with higher interest rates. Now that they’ve made it through the worst of the downturn, they’re looking to get a better rate and actively pursue their options,” Spears said.
If you are one of those people who is thinking about starting a small business, growing an existing business or looking for loan options, the SBA has plenty of resources to get you started. For help with the development of a business plan, loan information and start-up tips, contact the Bluegrass Small Business Development Center at (859) 257-7666.