During her 35 years with the Small Business Administration (SBA), Anne Hunt has seen some major companies grow from struggling startups to household names. “Nike, Apple, Ben & Jerry’s and Columbia have all relied on SBA assistance at one time,” she said. Today, as the director of the Connecticut District Office, one of Hunt’s top priorities is addressing what has long been the biggest challenge faced by small and microbusinesses: access to capital.
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During her 35 years with the Small Business Administration (SBA), Anne Hunt has seen some major companies grow from struggling startups to household names. “Nike, Apple, Ben & Jerry's and Columbia have all relied on SBA assistance at one time,” she said. Today, as the director of the Connecticut District Office, one of Hunt's top priorities is addressing what has long been the biggest challenge faced by small and microbusinesses: access to capital.
As the criteria for small business loans from commercial banks have become more restrictive, the SBA is leaning on a different type of lending institution — Certified Development Corporations (CDCs) — to make loans available to small and microbusinesses with an emphasis on spurring growth in an underserved area. “One of the requirements [of CDC lending] is that 60 percent of the loans need to go to support low-income areas, minority-owned or women-owned businesses,” Hunt said. The trends are positive.
Among the $287 million in loans that the SBA district office supported in fiscal year 2015-2016, Connecticut ranked No. 1 across all of New England in the percentage increase in lending to underserved markets, up 36 percent for the fiscal year, with loans to African Americans up 42 percent and Hispanics up 61 percent.
Community Investment Corp. (CIC), a Hamden-based SBA-supported CDC, led the state in 2015 with nearly $19 million in 504 loans, a type of long-term, fixed-rate loan that can be used by small businesses for acquisition and/or renovation of capital assets including land, building and equipment. The real benefit of 504 loans, says Mark Cousineau, CIC's president, is it allows small business owners to get up to 90 percent financing. “That's not something a small business owner could do through a commercial bank,” Cousineau said.
And SBA's Hunt notes that the 504 loan program actually gets commercial banks and CDCs partnering together. “A commercial bank might loan 50 percent of the amount [for a minimum of 10 years, per SBA regulations], a CDC will cover 40 percent — fixed for 20 years — and the business owner owes 10 percent,” Hunt explained. “It's a win for the bank, which takes on less [loan] risk, a win for the business owner who needs less upfront capital and a win for the SBA because these businesses create jobs.”
Business and job creation have been CIC hallmarks, said Cousineau. He points to his development corporation's early adoption, in 1993, of microlending designed to provide early capital to startup companies. “In its early days, the loan cap was $25,000,” Cousineau said. “Today, it's $50,000.” Over the near quarter century, Cousineau estimates CIC has helped more than 400 businesses launch with microloans.
Last year alone, CIC processed a total of $235,500 in microloans to 13 startups and is on pace to surpass those figures this year, with $189,000 in startup loans through June.
That upward trend reflects the overall lending trajectory of lending from certified development corporations. In fact, according to the SBA Connecticut's 2016 Small Business Guide, between 2009 and 2015, the total number of loans are up nearly 21 percent and the average loan size is up 24.4 percent to $287,475.
But launching a startup or expanding a small business takes more than just a cash infusion, says Hunt. “Consultative service is a big part of what we do — whether it's helping with creating a business plan or one-on-one mentoring,” Hunt said.
She points to the state's 35 Small Business Development Centers and active SCORE program, part of national network of more than 11,000 entrepreneurs, business leaders and executives who volunteer to mentor America's small business. In total, the Connecticut SBA office counseled and trained more than 6,000 clients in 2015.
And both the SBA and CDCs continue to innovate. Hunt points to the development of SBA One, an online tool — similar to TurboTax — that allows SBA-affiliated lending institutions to process loan requests faster through a series of preset questions. “It's a game changer,” Hunt said.
Cousineau sees both both technology and specialization as drivers of future growth in the small business lending industry. “Since I first started, our business has become more sophisticated,” he explained. “Today our staff of 15 is comprised of teams for lending, processing and closing, underwriting and loan services.”
The organization — which has offered loan programs in Rhode Island since 2004 — opened a new office in Providence this July and is bullish about its future growth. Currently, CIC has nearly $146 million in loans on its books, with nearly 95 percent in 504 loans. Cousineau said he expects steady growth across all loan programs.
