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Small businesses find plenty of local support; Banks, UALR and SBA provide loans and support to small business owners.

From finding money to start a new business or expand an existing one to finding information that can make a business more profitable, running a successful small business can be a big challenge.

In Arkansas, local banks and a partnership between the U.S. Small Business Administration and the University of Arkansas at Little Rock College of Business Administration offer a variety of resources to help the small-business owner.

Getting loans is one of the more formidable obstacles many small businesses encounter. Community banks often offer the best source of financing.

"Virtually everything we do here is classified as a small loan," says Bill Sholl, president of Pulaski Bank in Little Rock. "It's an area community banks do well and still focus on."

About 90 percent of all the commercial loans made at Pulaski Bank are to small businesses, Sholl says. The bank made $20 million in new small-business loans last year. Currently, the bank has about $120 million in outstanding small-business loans.

"Small business is our market," Sholl says. "That's what we do."

Bank of the Ozarks shares the philosophy. Kim Benjamin, an assistant vice president at the bank, specializes in small-business loans and teaches classes on dealing with the SBA.

"We are probably the only bank in the state that has a specific SBA specialist," Benjamin says.

Last year, the Bank of the Ozarks made more than 1,000 small-business loans statewide. In Little Rock, the bank made 218 small-business loans.

"Most of the commercial loans in Arkansas are considered small-business loans," she says.

Community banks like Bank of the Ozarks can help small businesses in ways larger, national banks can't. All the loan decisions are made locally and loan officers can look further than the mathematical formula used by larger banks.

"Sometimes, a small-business person needs someone willing to look outside the box," Benjamin says.

Carl Roberts, the senior vice president of loan administration for Metropolitan National Bank, agrees.

"We're easier to work with than the megabanks," Roberts says. "We are more accessible."

Last year, Metropolitan loaned about $31 million to small businesses. The amount has increased annually, he says.

Mercantile Bank also reports an increase in the number of small-business loans. Last year, the bank loaned $19.6 million to small businesses. The small-business loans make up more than 50 percent of all the bank's commercial loans.

"We have always been strong in the small-business lending market," says Donna Hardcastle, a senior vice president at the bank.

A pending merger with Firstar Corp. of Milwaukee won't change the bank's involvement with small-business lending, Hardcastle says. The merger with a larger bank will give Mercantile more resources to offer the small-business owners, she says.

Assistance From SBA

Many small businesses rely on assistance from the SBA to get financing from a bank. Banks use the SBA to guarantee loans that the banks are reluctant to approve. Usually, such loans involve borrowers who want a repayment period that is longer than the bank traditionally allows or they don't have enough collateral to meet the bank's requirements. The SBA will guarantee repayment of up to 80 percent of the amount of the loan to a small business.

"It allows us to do loans we wouldn't normally do," Roberts says. "You don't get much better than a government guarantee."

However, SBA-backed loans remain a small part of the lending activity. Metropolitan did 20 of the loans last year. Bank of the Ozarks did 22. Mercantile did 13 last year. Most of the loans go to people just starting a small business. Existing businesses usually don't need the extra help and already have an established relationship with a bank.

"It allows us to take a little more risk on a start-up company," Roberts says.

Community banks actively pursue small-business loans. Most of them have programs for contacting small businesses to solicit their business. Metropolitan requires each of its loan officers to contact 10 small businesses each month.

"That's where we get most of our business," Roberts says.

Loans to small businesses generally are good credit risks, bankers says. The default rate is less than 1 percent, they say.

"We haven't had more than five loans go into a loss category," Roberts says.

The Arkansas Small Business Development Center, a partnership between the SBA and UALR, offers support and resources to small businesses not available anywhere else in the state. Founded in 1979, the ASBDC has eight regional offices in the state - Little Rock, Fort Smith, Harrison, Hot Springs, Magnolia, Osceola, Pine Bluff and Stuttgart. The ASBDC also has Operations at Arkansas State University at Jonesboro, Henderson State University at Arkadelphia and the University of Arkansas at Fayetteville.

The ASBDC, one of 950 such centers nationwide, offers consulting, training and a source of information for small businesses.

The staff at ASBDC provides confidential consulting to small-business owners on such topics as developing a business plan, creating a new business, buying or selling a business, applying for bank loans, marketing and developing financial analysis and budgets.

The training is provided through a series of workshops and seminars that are taught by staff members and businessmen in the community. Topics include starting a business, business planning, financing, marketing, government contracting and computer and Internet technology. Last year, the organization offered 238 seminars that were attended by 3,257 people.

ASBDC Library a Useful Tool

One of the most useful tools the ASBDC offers is a non-lending library located in the Little Rock office. The library has an extensive collection of books, periodicals, newsletters, audiotapes, videos, software and Internet data bases. All the information is free to small-business owners.

"It's the best source of business information in the state," says Phil Harris, a business consultant with the organization.

Last year, the ASBDC added an export development program through a grant from the SBA. The program provides training, export readiness assessment, market research and referrals to other export assistance organizations in Arkansas. It is designed primarily for companies just entering the export market.

The SBA grant allowed the ASBDC to add more than 100 export-related books, magazines, newsletters and software to its library and to subscribe to a Internet service that helps companies develop export business.

Other services available through the ASBDC include the Arkansas Executive Conference, which provides a forum for owners of small business to meet and discuss business issues. Currently, there are three groups. One deals with businesses marketing to local customers, another focuses on marketing to national customers and the third one deals with businesses focused on manufacturing issues. A fourth group is forming that will consist of businesses within the medical and high-technology sectors.

Small Business Facts

* In 1996, the United States had 6,190,907 businesses with employees. Of those, 99.7 percent were classified as small businesses (fewer than 500 employees). In Arkansas, 97.3 of the companies were classified as small business.

* Small businesses provide 53 percent of the private sector jobs in the nation.

* Small businesses get 35 percent of the federal government contracts.

* Small businesses account for 28 percent of the jobs in the technology industry and 96 percent of all exporters.

* The number of Hispanic-owned businesses increased by 83 percent from 1987-1992, the highest increase for any minority group. In Arkansas, the number grew by 116 percent to a total of 701 companies.

* The leadership of 43 percent of family-owned businesses is expected to change hands by the year 2002.

Source: U.S. Small Business Administration
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Comment:Small businesses find plenty of local support; Banks, UALR and SBA provide loans and support to small business owners.
Author:Lovel, Jim
Publication:Arkansas Business
Geographic Code:1U7AR
Date:May 24, 1999
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