Nelson: Small business loan program in trouble
A local, small business owner sat down with a U.S. senator to explain his frustration with a federal program designed to help small businesses, that, in his opinion, has failed miserably.
U.S. Sen. Bill Nelson met Tuesday with North Fort Myers business owners Greg and Mary Ann Bullock, owners of Graphic Sign Solutions, to bring the issue to light.
The controversy surrounds the government’s $255 million American Recovery Capital program that was launched June 15 by the Small Business Administration.
The goal was to help small businesses temporarily get through the current economic downturn by providing them with zero-interest, no-fee loans of up to $35,000.
The loans are 100 percent federally guaranteed, designed so banks do not need to be concerned about risk if the loans go sour.
“So far, only 65 loans have been made in the state of Florida,” Nelson said. “That is appalling.”
The senator said he believes banks are instead pushing high interest credit cards to small business owners — and Nelson said that much to President Barack Obama in a letter he sent Wednesday.
Greg Bullock told of his steps to try to get one such loan, but he was turned down by numerous lenders including Regions Bank, Wachovia and Sun Coast Federal Credit. He also tried to go through the Small Business Center at FGCU and the Small Business Administration.
Bullock said he was even turned down by a local bank where he had business accounts.
“They are like so many businesses all across America. They are having a very difficult time making financial ends meet and they are threatened with the prospect of having to close down,” Nelson said.
“When we passed the economic stimulus bill six months ago, one of the aspects was a whopping amount of money — $255 million — into the Small Business Administration to make 100 percent, federal guaranteed loans to small businesses at no risk to the bank,” he said.
Yet, so far, very few loans have been approved.
“The problem is in setting up these loans is that the banks don’t want to make them in the first place because banks can make a lot more money by making the small business owner borrow their money on their credit cards,” Nelson said.
“And the big banks like Citibank and Bank of America that have been loaned so much money by the federal government — bailout money at $45 billion a piece — aren’t participating,” he continued. “That’s how much the federal government stepped up to help them and now they refuse to participate in these loans. That’s simply not right.”
Nelson explained that another problem is within the administration of setting up the loans.
“They are so stringent that very few businesses like his (Bullock’s) can qualify. They say they have to be in business for two years, but one of those years has got to be profitable,” he said. “We’re in the middle of a recession. They can’t be profitable. So Mr. Bullock is in a situation that he may need to shut down his business and, you can imagine this, the stimulus money was to keep businesses in business, let them start turning a profit and let them pay it back in five years.”
“Basically we’re looking at possibly closing the business because sales are down about 50 percent and that’s not due to lack of marketing or anything like that,” Bullock said. “People out there just don’t have the money to spend.”
His business provides signs of all kinds including real estate, electric and business cards.
“Lee County has been one of the hardest hit in the country,” Nelson said, adding that businesses have no extra income for promotion.
The senator asked about the Bullocks’ process in trying to get the loan and how many times they were turned down.
“It has to be at least a half a dozen,” Bullock said. “The majority of the responses were, first of all, they didn’t know about the program, and second, once they checked, they said, ‘We don’t participate in the program.'”
He noted that the criteria of showing a profit in the last few years was the deal breaker.
“I have this all over the state of Florida,” Nelson said, adding that is why he plans to campaign until he is “blue in the face” on the issue.
In his letter to Obama, Nelson urges the president to step in and exercise his authority to “develop an aggressive plan of action to increase participation in SBA loan programs by all TARP (Troubled Asset Relief Program) recipients.”
The senator said those are first and foremost Bank of America and Citibank.
Regions Bank was invited to respond to the issue.
“While we can’t comment on specific customer relationships, Regions is an experienced SBA lender and the ARC loan, like all SBA loans, is governed by strict SBA guidelines for underwriting,” said spokesperson Mel Campbell.
Gilbert Colon, deputy district director of the South Florida District Office of the Small Business Administration, said there have been some successes.
“Activities as of Aug. 23 include that there have been 1,589 loans made across the country for $51.9 million,” he said. “We have determined that 48 states have made loans, 520 lenders participating. These loans were done over a course of time since the beginning of the loans. The week of the (August) 23rd, 226 loans were recorded.”
Colon said it took some momentum to get the program going.
“It began to trickle down, and now people have an idea how to do this,” he said. “The bankers needed to be trained and learn the features of the program.”
Nelson said he encourages small business owners to go after the loans and let him know what the outcome is. He specifically welcomes contact with small business representatives who have no success.
Contact U.S. Sen. Bill Nelson at his local office, located at Justice Center Annex Building, 2000 Main St., Suite 801, Fort Myers, at 334-7760. The main office can be reached at (202) 224-5274 or visit: billnelson.senate.gov.