At UVa, leaders gather intel on financial needs of small businesses

Money is available to small-business owners with great credit, but they are usually the ones who are not seeking loans and instead are cutting inventory and employees to get by with less, experts said Thursday.

Meanwhile, small businesses without significant collateral that need loans to keep operations going are having trouble meeting requirements that are being followed more strictly now.

“So much of the focus has been on supply and not demand,” said Bruce Whitehurst, president of the Virginia Bankers Association. “Qualified borrowers are not borrowing and unqualified borrowers is where the demand is.”

More than 70 banking and small-business officials attended the seminar Thursday on addressing the financial needs of small businesses. The Federal Reserve Bank in Richmond and the Tayloe Murphy Center at the University of Virginia’s Darden Graduate School of Business Administration hosted the event to give the latest financial information on small businesses and see what the local needs are.

“We’re trying to gather the intelligence on the ground,” said Sarah Eckstein, project specialist with the Federal Reserve Bank of Richmond. “We’re hearing the gamut of things from businesses having no credit available to them to banks who can’t find credit-worthy borrowers.”

The seminar was one of more than 50 such meetings Federal Reserve banks are hosting around the country to discuss and promote the flow of credit to small businesses.

The Federal Reserve Bank of Richmond serves Virginia, Washington, Maryland, North Carolina, South Carolina and parts of West Virginia.

Federal and regional financial experts on Thursday talked about loans to small businesses and the economy as a whole.

Whitehurst said banks across the country have received “political pressure” to lend to more small businesses, but they also feel pressure not to make mistakes that will lead to another financial crisis.

“Banks and lending institutions are like grocers who want to sell groceries, in that they want to lend,” Whitehurst said.

He said banks are now looking at how to make the best financial decisions and help their clients rebound.

Robert Schnorbus, regional economist and manager at the Federal Reserve Bank of Richmond, told the audience the federal economy is continuing to rebound slowly.

He said that Virginia is in better shape than other parts of the country and Charlottesville has fared better economically than other parts of the state.

“Charlottesville has had an even milder recession than the state,” Schnorbus said. “Charlottesville employment has outperformed both the state and the nation in recent years.”

He noted that the university and other large employers play a big factor in the local economy’s stability.

But small businesses nationwide have been affected dramatically by the lagging economy, he said, and people must have confidence things are improving and will continue to improve.

“Small businesses in our district are just starting to increase their hiring and that is what we need for recovery,” Schnorbus said. “We’re seeing very muted levels of economic growth.”

After years of out-of-control lending by banks and spending by consumers, it will take time for things to bounce back, panel members said. And consumers should not expect things to ever return to the way they were just five years ago.

“Lenders have not tightened their lending standards, but are just adhering to the stricter standards they had all along,” said John Wiatt, senior examiner at the Federal Reserve Bank in Richmond. “Banks with the weakest risk management policies have failed.”

Those who do need the money to keep their businesses afloat have less valuable hard collateral and can’t find lending sources. People who want to start new businesses have also faced challenges because there is little seed capital to get started and banks are less likely to loan on a new business venture, Wiatt said.

Timothy Hulbert, president of the Charlottesville Regional Chamber of Commerce, attended Thursday’s meeting and said there was solid information to be gathered by both banks and small businesses.

He said data from retail sales in the Charlottesville-Albemarle area have been on the upward swing for the last three months and house sales are also up. But he is aware there is still a lot of concern that the economy is not recovering fast enough.

“The people [at the seminar] are believers there are better times ahead,” Hulbert said. “If you’re in business, especially in the chamber business, you have to be optimistic.”

Forum partners included the Virginia Bankers Association, the Charlottesville Regional Chamber of Commerce, the Virginia Small Business Development Center, the Virginia Department of Business Assistance and the Virginia Small Business Financing Authority.