In June, Virginia remodelers Charlie and Diane Gallick asked about a deferral on their commercial property loan, a 504 with the Small Business Administration (SBA). Not only did the lending agent quickly agree to OK a three-month deferral, with no fees, but because Charlie is a military veteran she also steered him to a low-interest SBA “Patriot Express” loan that would help fund The Gallick Corp.’s big fall marketing push.

It only took two days to get the deferral, Charlie says, and no, the paperwork wasn’t onerous.

The American Recovery and Reinvestment Act (ARRA) is encouraging more banks to participate in quick-turnaround SBA programs, through inducements such as reduced fees and higher guarantees, says Peggy Fajohn, of the agency’s Richmond, Va., office. Forget the epic tales of bureaucratic hoops; SBA’s Express Loan program, for instance, extends loans and credit lines up to $350,000, and has just three forms (in addition to whatever forms the partner bank requires). Banks that are “delegated lenders” can get an immediate response on a borrower’s eligibility, she says.

For seriously cash-strapped businesses, SBA’s America’s Recovery Capital (ARC) program provides interest-free loans of up to $35,000. Launched in mid-June, the program had provided 1,375 loans as of August 16, says SBA spokesperson Mike Stamler. Click here for a summary of SBA’s Recovery Act-related programs.

The timing for such programs is right. In an online survey created by this publication, 37% of remodelers have said their credit situation is either “worrisome” or “desperate,” in some cases because their long-time bankers have pulled or reduced their credit lines.

The remainder said that they either don’t borrow, period, or say that their credit access is “fine.” But even some of these fear that the months ahead will erode their cash reserves -- or that their banks won’t help them when and if they need it.

More Squeeze Than Juice?

Unfortunately, the Gallicks’ borrowing experience appears to be more remodeling exception than norm. So far, the SBA’s lofty lending ambitions -- like much of the economic stimulus plan -- seem to be having a pretty limited impact on the industry. Some remodelers who have inquired with their banks say that their banks either don’t participate in SBA programs or seem to wish they didn’t. They’re “a lot of squeeze and very little juice,” as one remodeler paraphrases his local banker’s sentiment.

National Small Business Association, 2009 Mid-Year Economic Report
National Small Business Association, 2009 Mid-Year Economic Report

“The banks don’t like them,” says Ohio remodeler Chuck Fannin, echoing accountants and others with whom he has discussed SBA programs. His 25-year-old company, Fannin Remodeling, is hoping to get an ARC loan to help it make up for some time it lost when a rezoning plan forced it to relocate in 2007. That $35,000 would go a long way toward updating the company’s website and getting signage for its new location, among other things. The Fannins are grateful that their long-time bank is willing to look into the ARC program, given that only 66 ARC loans have been made in the entire state of Ohio, as of the latest SBA report. One source of worry, however, is that “they want us to use it to pay off high-interest credit cards and debt,” says Deb Fannin, office manager. “We don’t have much debt. We always pay things off,” or tap into cash reserves when needed.

In all, the U.S. has more than 2,000 “approved SBA lenders,” according to the National Association of Government Guaranteed Lenders. More than 1,600 of them have approved 10 SBA loans or fewer. The top SBA lender, by volume, is Wells Fargo. 

What about the smaller, community-based banks with which many remodelers do business? This reporter made several attempts to contact the Community Bankers Association, but those calls were not returned.

Speaking of Squeeze …

So what to do if you need financing and can’t get it from your bank? If your bank does not participate in SBA lending programs, visit this page of SBA online to find a local office in your area. There are 29 such offices in Virginia alone, for instance, and regardless of whether you’re eligible for a loan, “We have counselors, resource centers, classes,” as well as a list of hundreds of banks that do participate in SBA programs, Fajohn says.

“Of course, we don’t offer loans to anyone,” says SBA’s Stamler. You’ll have to demonstrate that your business is viable, and “There will be paperwork, whether you’re applying for an SBA loan or any other.”

Just have faith that the government does want to help. “The SBA always wants to be a lending source to small businesses, in good times and more difficult times,” Fajohn says. “And because of the Recovery Act, we are doing an extraordinary amount of outreach to lenders” and to small businesses directly. --Leah Thayer, senior editor, REMODELING.