Alternative Lenders Roundtable Event Connects Small Businesses with Resources

Monday, December 24, 2018

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Small businesses are critical to Skagit County’s economy. They provide important products and services, create jobs and are a tool for wealth creation.  According to the U.S. Small Business Administration (SBA), 99.9% of U.S. businesses are small businesses. These small businesses in aggregate employ 47.5% of all U.S. employees.[1]  Surprisingly, four out of five are single employer businesses.[2]

Here are just a few of the reasons small businesses are important to our local economy:

  • Small businesses are a significant contributor to the character of a place by adding vitality and vibrancy to a community.  The character of a place is important to businesses of all sizes – and their employees.
  • Resilient small businesses have an entrepreneurial mindset and skill set that benefit the local economy.
  • Entrepreneurial small businesses observe the business landscape, identify customer/client needs and designing offerings, continually reevaluating, and refining products and services.  They evolve with communities.

Many small businesses struggle in our changing economy.  As the state of the economy evolves and small businesses seek to add product or services, grow in size, or change hands, access to capital can be a challenge.  This is especially true for start-ups, first time borrowers, non-employer businesses, those with poor credit, and those without significant equity or collateral.  At EDASC, we have been curious to know if businesses seeking funding are able to find appropriate sources of funds.  If not, how can we identify funding gaps across the spectrum of business from start up to those going through a growth stage?  What can the many support organizations do to provide accurate referrals and assist businesses to prepare for financing?

A robust and well-connected entrepreneurial infrastructure, which includes capital funding and support services, will allow the region to successfully grow resilient businesses and attract additional capital.  Skagit County businesses and lenders will benefit from making it easier for entrepreneurs to access capital across the continuum by improving existing infrastructure.

 

Bridging the Gap, Alternative Lender’s Roundtable

 

In December 2018, the Washington Small Business Development Center (SBDC) and EDASC sponsored Bridging the Gap, Alternative Lender’s Roundtable.  This event was designed to highlight alternative lenders and provide an opportunity for attendees, including businesses, traditional lenders, investors, and support organizations to work together to identify gaps in the lending continuum and begin a discussion about how to bridge them.

As a kick-off event, the Roundtable provided exposure to micro lenders and a private local lenders network.  All attendees, listening, collaborating and working together, identified early and late stage gaps in the existing spectrum of available capital. The feedback EDASC received indicated the following:

  • Borrowers would like to be able to find and understand the array of options available to them.
  • Many small businesses had not been exposed to micro lending as a possibility.
  • Traditional banks would like businesses to be better prepared with documentation like business plans and cash flows when applying for a loan.
  • Private local lenders would like to be better connected to small businesses in the community.
  • Micro lenders would like to connect with businesses and collaborate with traditional lenders to increase financing potential for small business.
  • Support organizations appreciated the micro lending information, and are now more likely to refer businesses to them.

Regional microlenders presenting at the Roundtable event included Eric Shen, Transition Fidalgo local lenders; Melissa LaFayette of the National Development Council (NDC) and the Skagit County Revolving Loan Fund; Roland Chaiton, Business Impact Northwest; Antoinette Marasigan, Craft 3; Desiree Haschke and Angelica Partida, Evergreen Capital; and Elizabeth Rusnak, Northwest Business Development Association.

 

Opportunities to Access Capital Today

 

In Skagit County there are a variety of opportunities for Skagit County businesses to access capital, including microlenders, alternative lenders, credit unions and banks.  Microlenders will typically loan $50,000 or less and tend to work with early stage businesses.  Alternative lenders, like the National Development Council (NDC) and the Skagit County Revolving Loan Fund, provide capital to small businesses who do not yet qualify for traditional lending.  Revolving loan fund loans have included, for example, $100,000 in working capital to finance the long time period between a winery purchasing grapes and selling a bottle of wine.  Another loan through this program was to a restaurant for $500,000 to fund tenant improvements to build out an adjacent space to expand the restaurant, and a $75,000 loan was issued to a small manufacturer to fund the purchase of equipment needed to improve and expand operations.  The Skagit County Revolving Loan Fund looks for businesses that make a positive impact on the local economy, whether that is providing quality jobs, or goods and services that the community needs.

As Melissa LaFayette, Assistant Director for the NDC said, “We fit into the gap between microloans and traditional bank loans.  Business capital needs span a continuum depending on the size of the business and the stage they are in – whether a start-up, newly expanding, or mature business.  Microloans usually work best for start-ups, whereas a larger, mature business may find the best capital resource at their local bank.  Alternative lenders operating in Skagit County cover different parts of that continuum.  The Skagit County Revolving Loan Fund fits in the gap between microlenders that provide small loans up to $50,000, and traditional bank loans.  A community can create a healthy business capital environment by making capital available at all points on the continuum – so that start-ups have the resources it needs to grow into a mature business.” 

 

Future Activities in 2019

 

The SBDC and EDASC will continue to provide information and create opportunities for businesses and various lenders to connect in 2019.  Future focus group sessions will work toward bridging gaps in the lending continuum, allowing our community to grow in connectivity and increase the size of the capital pie to improve capital access for small business.  If you are interested in joining a focus group please contact Cindy Brooks, Certified Business Advisor for Washington SBDC and EDASC, at cindy.brooks@wsbdc.org.

 

References:

[1] Retrieved from https://www.sba.gov/sites/default/files/advocacy/2018-Small-Business-Profiles-All.pdf

[2] Retrieved from https://www.sba.gov/sites/default/files/advocacy/Nonemployer-Fact-Sheet.pdf

Category: Business Retention and Expansion, Small Business, Resources, Financing, Capacity Building