Suburban experts: 'Creative' methods drive business lending
After years of stagnation, money is starting to become more available to businesses seeking loans to grow and build capital.
But how and where to get that money remains an issue, a panel of industry experts told about 90 suburban business leaders Thursday at the Daily Herald Business Ledger's Newsmaker Forum on Banking and Finance: Raising Capital, held at Hilton Lisle/Naperville.
The panelists agreed that while the lending environment has improved since the banking crisis in 2008, traditional lenders are still guarded in granting new loans this year.
Brent Hamachek, president of Segueway business transactions and training in Northbrook, said this stems from banks being vilified from the crisis, leaving them still wary about making loans that have even slight risks. As a result, he said, businesses need to be more creative in finding funds to start and grow ventures.
"The rule today is either get creative or get out," Hamachek said. "If you can't think outside of the box, you are going to find it difficult to raise money for anyone, except the healthiest of companies."
He said creative efforts have come from private investors or vendors who have the cash to lend, and have a stake in helping that business.
"The key questions for them are, what do you want, what do I get, and how do I get out?" he added.
Daniel Gresla, managing director and head of loan syndication at Associated Bank in Chicago, echoed that sentiment. While banks are more stable now than a few years ago and are more willing to lend money, he said that businesses with small risks are the ones that are currently getting loans.
"If you're in that center of the fairway, then things are good," he said. "In fact, it's a feeding frenzy."
However, Gresla said he expects the atmosphere to improve slowly during the year, especially in the Midwest as the market conditions improve.
"In the Midwest, it's steady as she goes," he said.
Gresla added banks will also become more creative with lending as they work with businesses to secure funding for capital and growth.
The Small Business Administration has been and continues to be a major player in providing funding for local companies, said Judith Roussel, SBA's Illinois District Director. She noted changes in federal regulations over the past two years have given the SBA more opportunities to help small businesses find capital. For example, she said, recent legislation now allows community-based nonprofit organizations to provide SBA-backed loans up to $250,000.
"The SBA continues to be the largest single backer of loans to small businesses," Roussel said. "However, we are pleased that we are seeing many more players on the field to try to help meet the needs of small business."
One area that may see more activity this year is mergers and acquisitions, according to Kevin Simpson, managing director of Focus Capital Advisors in Downers Grove. With corporate tax cuts ending this year, the tax liability involved in selling companies will significantly increase in 2013. Simpson noted that could lead to a number of businesses making a move this year.
He noted the massive "transfer of wealth" as Baby Boomers retire, which was predicted to occur over the past decade. has not happened yet for a number of reasons.
"But they do have to start retiring sometime," Simpson said.
But many boomers may retire and transfer or sell their businesses this year with interest rates at record lows and money becoming more accessible, in addition to avoiding a greater tax burden next year.
"It has converged to a point where we may see action in the merger and acquisitions market again," he said.
The Daily Herald Business Ledger Newsmakers Forum was sponsored by Associated Bank and American Slide Chart/Perrygraf. Marketing partners were the Greater O'Hare Association of Business and Industry and the Lisle Chamber of Commerce.