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<DIV class=timestamp>September 9, 2011</DIV>
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<H1><NYT_HEADLINE version="1.0" type=" ">Mr. Banker, Can You Spare a
Dime?</NYT_HEADLINE></H1><NYT_BYLINE>
<H6 class=byline>By <A class=meta-per
title="http://topics.nytimes.com/top/news/business/columns/josephnocera/?inline=nyt-per
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href="http://topics.nytimes.com/top/news/business/columns/josephnocera/?inline=nyt-per"
rel=author>JOE NOCERA</A></H6></NYT_BYLINE><NYT_TEXT>
<DIV id=articleBody><NYT_CORRECTION_TOP></NYT_CORRECTION_TOP>
<P>Not long ago, I received an e-mail from David Rynecki, an old friend and
former colleague who left journalism a half-dozen years ago to become a small
businessman. David’s firm, <A
title="http://www.blueheronresearchpartners.com/
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href="http://www.blueheronresearchpartners.com/">Blue Heron Research
Partners</A>, does research for investment professionals; he was writing to
share his frustration in trying to build a business in the aftermath of the
recession. </P>
<P>“Like many small businesses,” he wrote, “we were socked by the recession.
Rather than cut back, however, we chose to be aggressive.” He and his wife,
Marcia, invested everything they had in the firm. They refused to lay off their
three employees. During an especially bad stretch, they used their credit cards
to stay afloat. </P>
<P>Their risk-taking paid off. “We’re hiring again,” David’s note continued.
(Indeed, he’s now got a full-time staff of nine.) “Business is strong. Our
receivables are unbelievable. We have long-term contracts with established
investors.” </P>
<P>His problem was — and is — the same one facing millions of small
businesspeople. With lending standards extraordinarily tight in the wake
of the financial crisis, banks simply aren’t making small business loans, not
even to perfectly creditworthy people like David. Which means he can’t
expand — and hire — the way he would like to. Yes, he said, he could
continue to plow his cash flow into the business and grow it slowly. But
to get the firm to the next plateau, he needs a bank loan. </P>
<P>“Banks say they have credit to offer,” he wrote. “And they make you go
through all the motions. But then they offer nothing.” He tried three times to
wrest a paltry $50,000 from two different banks, including JPMorgan Chase, which
the firm uses for its own banking needs. He showed the loan officers Blue
Heron’s receivables and its long-term contracts. It didn’t matter. He was turned
down all three times. No collateral, said JPMorgan. Lack of a relationship, said
the other bank. </P>
<P>As it happens, around the same time I was hearing from David, a small
businessman on the West Coast was sending me very similar e-mails. His name is
<A
href="http://www.coffeehouseinvestor.com/the-coffeehouse-rules/about-bill/">Bill
Schultheis</A>, and he was trying to help his wife start an upscale spa in
Bellevue, Wash. He and his wife, Zhiqin Zhang, were looking for $500,000. </P>
<P>“My wife moved here from China 13 years ago,” Bill wrote. She had already
built and sold two spas; now she wanted to create something bigger and more
luxurious. If all went according to plan, wrote Bill, she would employ between
25 and 35 people — “something Obama would appreciate,” he added with a touch of
sarcasm. </P>
<P>Bill sent me the business plan for the new spa. It was impressive. He
outlined Zhiqin’s track record. He explained that the cash flow from his day job
— he’s an investment manager — could pay off the loan within 18 months. And then
he sent me a chronology of his failed efforts, going back to April 2010, to land
a loan that would allow Zhiqin to follow her entrepreneurial dream. </P>
<P>Wells Fargo. Cathay Bank. KeyBank. Columbia Bank. In all, 14 banks turned
down Bill and his wife. Lack of collateral was invariably the reason. “Banks
tell us to get lost when we come knocking on the door, even though we are
putting up 60 percent on a $1.3 million project, which is halfway complete,”
Bill wrote in early August. </P>
<P> A few weeks later, however, Bill sent me another, very different
e-mail: Bill and Zhiqin were going to get their loan after all. A local
institution, <A
href="https://www.sterlingsavingsbank.com/personal_banking/personal_home.aspx">Sterling
Savings Bank</A>, based in Spokane, Wash., had said yes — much to their
amazement and delight. </P>
<P>Why had Sterling been willing to overlook the lack of collateral, which had a
been a deal-breaker for every other institution? Because, as one of its
executives, Robert Weisel, explained to me, making sensible loans to small
businesspeople was how Sterling competed for business — even when the loan
applicants didn’t meet “the traditional standard,” as he put it. </P>
<P>“We are linked to our region and our community,” he said. ‘We try to
distinguish ourselves by trying to figure out how to make transactions work,
even if it means being willing to think outside the box.” In this case, Bill’s
cash flow and Zhiqin’s track record more than made up for the lack of
collateral. </P>
<P>On Thursday night, President Obama <A
href="http://www.nytimes.com/2011/09/09/us/politics/09text-obama-jobs-speech.html?_r=1&ref=politics">offered
up</A> a series of tax breaks to small businesses as part of his jobs package.
“Everyone here knows that small businesses are where most new jobs begin,” he
told Congress. I don’t mean to diminish the tax relief, which may, indeed,
encourage small businesses to start hiring. But, far more than tax relief, small
businesses need credit. That is what the president should be pushing for. </P>
<P>Three years ago, the federal government used tens of billions in taxpayer
dollars to save the banking system. Now, at this dire economic moment, the
country needs the banks to return the favor. Pushing the country’s banks to act
more like Sterling Savings Bank, and less like JPMorgan Chase, is something that
the president might want to put on his jobs agenda. </P><NYT_CORRECTION_BOTTOM>
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<DIV><FONT size=2
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<DIV><FONT size=2 face=Verdana>Wayne A. Fox<BR><A
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