Small business owners across Ohio are more confident about the economy and borrowing money at levels not seen since 2008, based on lending volumes provided by the US Small Business Administration’s area district director.
Last budget year, 1,799 government-guaranteed 7(a) loans for working capital and business acquisitions were approved in southern and central Ohio, said Martin Golden, director of the federal Small Business Administration’s Columbus, Ohio, district. The district covers 60 counties including a Cincinnati branch office. Those loans deployed a total $358 million worth of capital in the regional economy, fueling business expansions and new construction, Golden said.
More 7(a) loans, the federal agency’s largest small business loan program, were approved during the October 2013 through September 2014 period than every year since the Great Recession ended in 2009. However, volumes are not quite back to pre-recessionary spending. In 2008, small business owners in this Ohio district obtained 1,908 loan approvals, according to Golden.
“I think the banks have cleaned up their balance sheets and there’s a lot of liquidity in the market,” he said.
An additional 96 loans under the 504 program for commercial real estate were approved last year totaling $65 million. However, this loan program’s growth is flat compared to past years, Golden said.
Not only is higher small business lending a signal that business leaders are more certain about their prospects, it’s another signal in a growing pile of evidence that Ohio’s economy is doing better. It just has yet to fully recover. For example, statewide unemployment has fallen to a pre-recession low of 5.3 percent due somewhat to job growth, and some to a shrinking labor force, according to the most recent figures available from Ohio Department of Job and Family Services.
“The more confident (business owners) are, the more likely they are to fund expansion, and more importantly, hire workers,” Golden added.
Approximately half of Ohio’s workforce owns or works for a small business, said Golden, who considers small businesses those with 500 or less workers.
When the economy was down, Neftali Roblero and his business partners decided to strike while the iron was hot and open a used car dealership. Roblero, Gerardo Acosta and Miguel Garcia all own international supermarkets in Hamilton and Fairfield, and heard horror stories from their Spanish-speaking customers about their car-buying experiences.
Seeing the opportunity to open an auto dealership that could be promoted to their grocery customers, they opened Mi Tierra Auto Sales LLC at 3108 Dixie Hwy., Hamilton. They also heard from their customers a need for a Spanish-speaking car dealer to negotiate contracts in a language customers could understand and know what they’re signing up for.
The partners obtained an SBA-backed loan to buy the property and building through Access Business Development Finance Inc. The Certified Development Co., which is authorized to make small business loans by the US SBA, also helped the entrepreneurs fill out and file the necessary paperwork.
“We are in the fifth year of this business,” Roblero said. “We already have a relationship with most our customers. We tell them exactly what car they’re buying.”
Ohio business owners like Roblero don’t see the economy back peddling, but their six month outlook reflects more of the same for the local economy, based on the findings of a PNC survey of small- and medium-sized companies.
Business has been tough, Roblero said. “Competition has been a factor. The economy has been another factor,” because more people are able to afford to buy new cars again, he said.
The PNC Financial Services Group Inc. conducts the survey twice-a-year, and released the latest results in October.
Key findings include:
o Approximately 40 percent of Ohio business owners told PNC say they were impacted by last season’s harsh winter, and of those, 70 percent say they have not yet fully recovered.
o Fewer Ohio business owners surveyed this fall (39 percent) expect sales to grow the next six months than survey takers in the spring or those surveyed a year ago. But that’s also because more owners (48 percent) expect sales results to stay the same, and not because they’re projecting sales to decline.
o As a result, 11 percent of Ohio business leaders expect to do more hiring in coming months whereas hiring is forecast to pick-up by 20 percent nationally, based on PNC’s survey results.
Rather, more Ohio business owners (82 percent) plan to keep payrolls constant than they did a year ago. There are no plans to cut more workers.
Business owners have been cautious, waiting to see what will happen before they invest in more people or equipment, said Steve Foster, president of LCNB National Bank of Lebanon. But sales are generally up and interest rates remain historically low, which makes the cost of borrowing favorable, Foster said. Those factors make the bank’s commercial loan officers optimistic.
“The economy’s improved, so they have more confidence they need to either borrow money or spend money to grow their businesses. They have more demand, they have more need,” Foster said.
“I would say we’re seeing that.”