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Lending Opportunity: SBA loans leveling off in SWMO in $130M range

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Chris Gardner was a corporate accountant for more than 20 years when she quit her job to pursue her passion.

“I didn’t know what I was going to do. I was just kind of finished with corporate America,” she said. “I really just like people, and I’d been back in an office with Excel for a long time.”

On Aug. 20, she’ll take her first dive into retail and business ownership when she opens Mainstream Boutique, a Minnesota-based women’s clothing franchise.

For most entrepreneurs, starting or growing a business requires up-front capital, which for many comes in the form of a U.S. Small Business Administration loan.

In fiscal 2017, 319 SBA loans amounting to nearly $124 million were secured by southwest Missouri business owners, according to data from the SBA.

Gardner was in the mix. She was approved for a $187,000 SBA loan through Guaranty Bank to pay for inventory, furniture, the build-out of the store and large deposits, like rent.

While her store in Brentwood Center currently smells of fresh paint with empty mannequins lining the walls, she said the boutique would soon be filled with clothes and accessories for women of all ages.

“I wanted to create a business where I could employ people and value my employees,” she said. “And to the people that are coming in, to give them confidence and help them value themselves.”

To apply for the loan, Gardner said she prepared her tax statements, a personal finance history and collected values of all her assets. “The application wasn’t too bad, but that’s my background,” she said. “You’ve got to have your finances in order.”

Evaluation time
Christian Lewis, regional SBA director with Simmons Bank, said when evaluating an entrepreneur’s request for a loan, he looks for specific traits that indicate success.

“We want to know that we have a business operator,” he said. “That they know how to zig and zag when they may hit roadblocks.”

From there, he and his lenders review project feasibility and personal financial history.

“Will it be able to make money and be able to repay our loan?” Lewis said of evaluating a business plan.

Arkansas-based Simmons Bank is consistently near the top of SBA lenders in southwest Missouri, according to SBA data. Past Springfield Business Journal reporting shows Simmons provided 55 SBA loans amounting to $16.9 million across 28 counties in southwest Missouri in the SBA’s fiscal 2017.

For the first six months of this year, Lewis said the bank has provided 23 loans in southwest Missouri totaling $8 million.

Chrystal Irons, director of Missouri State University’s Small Business & Technology Development Center at the efactory, said lenders are supportive of entrepreneurs who have a strong business plan.

“They are looking at each loan and trying to determine if they meet the ‘five c’s of credit’ – character, capacity, capital, collateral and conditions,” she said. “We meet with our lending partners frequently to ensure we understand what lenders are looking for and that we can accurately relay that information to our existing and startup clients.”

The SBTDC provides free support to those starting or growing a business.

New business owner Gardner said SBTDC regional small-business consultant Lance Coffman helped walk her through site selection, a business plan and the loan process.

“He gave great feedback, researched traffic counts and incomes and all kinds of demographic information on all kinds of comparable places around the city. They just had an abundance of information,” she said. “Working with the efactory was the best decision I made.”

Irons said the SBTDC works with local lenders to provide classes for entrepreneurs. One course, Starting a Business in Missouri, provides a panel discussion with a lawyer, accountant, a banker and small-business owner to discuss the logistics behind business ownership.

Jessie Hughey, an SBA loan officer with The Bank of Missouri, has helped lead these courses with Irons. She said she feels it is getting easier for entrepreneurs to secure startup capital.

“There are so many resources out there that are able to help you prepare for your SBA loan and so many bankers that know the SBA loan program, I feel like the application process is significantly easier than 10 years ago,” she said.

In recent years, Springfield has been recognized nationally on lists published by CNBC, Forbes, Business Insider and WalletHub as a top place to start a business, citing low cost of living and a growing population.

Out-of-state loans
SBA loans issued over the past 10 years have fluctuated in southwest Missouri from a high of $141 million through 385 loans in 2012 to a low of $83 million through 346 loans in 2009.

At Simmons, Lewis expects to finish this fiscal year in the $20 million range for SBA loans across southwest Missouri, which would match fiscal 2016 totals.

Other bankers say anecdotally SBA loans are back on an upward swing. Lewis said that’s partially due to more lenders, specifically SBA-preferred lenders, coming into the market.

“Other banks have started to see the value of the SBA loan program and what it has to offer our small businesses in our community,” he said. “Some of the dominance that Simmons used to have in the market has started to become somewhat saturated.”

Irons has noted the competition as well, and she’s seen banks step up their offerings to stay relevant. “Lenders are not only competing locally for customers but with internet-based companies,” she said. “Lenders are having to respond by providing a variety of services to a customer beyond just their initial startup loan.”

For instance, Lewis said Simmons hopes to soon provide online SBA loan applications.

Bankers also have noticed more out-of-state lenders coming to Springfield.

According to SBA data, 37 percent of lenders providing SBA loans in southwest Missouri are based out of state, a 10 percent uptick in the last decade.

Karin Bell with The Bank of Missouri said she’s noticed that trend in the past few years.

“They’re looking to see where there are strong business connections, and Springfield is a very great location for great opportunities for business owners,” she said.

Gardner said preparing her pitch for her loan was daunting, but she said it all comes back to confidence.

“I’m not a pushy salesperson, and you don’t have to be pushy, but they’re a bank and it’s their money that they’re risking,” she said. “They want to know that if they’re betting on you that you know what you’re talking about.”

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