Friday, December 24, 2010
Financial Crisis has big effect on small business lending
To remedy the crisis and prevent us from the next great depression, the Federal Government created the stimulus package and bailed out the banking industry. Despite many losing their jobs and businesses filing for bankruptcy, we were now responsible to have faith in the economy and start spending money. It was now the American peoples turn. Large businesses and Small businesses like the Blazing Onion were encouraged to continue growing and provide more jobs. Wow, quite the plan.
Our company, the Blazing Onion, had remained financially strong despite the collapse. Sales were still growing over the previous year. An opportunity jumped on my radar in Gig Harbor to build a third store. After carefully researching the community, landlord, and traffic patterns, Lorri and I determined that this was a great opportunity. We prepared our strategy, updated our business plan, and prepared to ask the bank for funds. We knew things were tough so we were prepared to invest 40% of the money needed ourselves, which is twice what was required for an SBA loan. This was the strongest we had ever looked for a loan request. We were going to help the economy with this decision. Surely the loan would be approved.
I had just listened to Warren Buffett talk on CNN. He said that during these collapses in history, the rich became richer by taking advantage of business failures and buying them up. Hearing him speak, I became very determined. We are definitely not rich, but damn it, we were going to build and open a new Blazing Onion. After all, our sales were constantly improving, we had paid off several SBA loans already, and we had a great track record with our current SBA loans.
I made an appointment with our bank. Lorri and I carefully prepared our documents. This was a solid deal. I reminded the bank enthusiastically about our food, decor, service model and growth plans. I then laid out the exciting opportunity to build our third Blazing Onion with our first full service Sports Lounge in Gig Harbor. I told them how busy we were going to be. This was exciting. As is usual when I present to a bank or vendor, my enthusiasm had made our loan officer hungry for a burger. Things were feeling pretty good, right? Wrong! A week after our meeting, he called and said "Sorry, but we're not loaning money right now". They had given us 5 previous loans so it felt pretty bad.
We had already started things in motion. What now? I was determined to keep making appointments until someone said "yes". Bank after bank I visited. Each bank that told me "no", I made give me two banks that might say "yes". This behavior continued for some time. I understood from the news that many banks had been given money to survive and re-invest. It turns out, the banks took the bailout but many still weren't loaning. I had to find one that was. Remember all those bank commercials with happy people smiling that just received a loan, I went there! In the end, 10 banks said "No". One was being audited by the Feds the morning of our appointment, which made the loan officer so nervous that he whispered during the entire meeting so the Feds wouldn't know he was talking to me about a loan. They were seized and sold to another bank within days of my visit. Sterling Savings said they would loan it to me if I had the identical or greater amount of money in the bank to secure the loan. Wow? If I was that well off, I wouldn't have stopped by. Most said "It looks like a great opportunity. I'm sure you'll be very successful. I'm really sorry, but we just can't loan money right now!" Despite the constant rejection, I approached each bank with the same enthusiasm. In June of 2009, Brian Salva from Heritage Bank in Tacoma called me. I can't remember much of the call. I had heard it so many times before. Heritage was bank #11. Like Charlie Brown's teacher, it all sounded the same. Wait, what did he just say? Breaking through the grey murky cloud of polite conversation, I heard something I hadn't heard from the other banks, "... WE ARE GIVING YOU THE LOAN...". Turns out Heritage was loaning money to small businesses like Obama promised. Heritage teamed with us, helping us provide 60 new jobs for the economy. All those banks that said "I'm sure you'll be very successful!" were right, we beat all our projections at Gig Harbor. Thanks for the faith Heritage. We just went to Heritage for our fourth Blazing Onion at Alderwood Mall. It took Heritage Bank less than a week to approve us.
In life, most of us will come face to face with rejection, even being knocked off our feet. Stand back up, dust yourself off, and stay on the offensive. Don't let someone else control your destiny. Many will block your immediate path, but you have the ultimate decision to let them stop you in your tracks or begin forging a new path.