I recently came across a photo on Facebook from the Pay It Forward movement. It was of a dry cleaner with a sign on the door that read, “If You Are Unemployed and Have a Job Interview, Bring Us Your Suit and We Will Clean It for Free.†The photo struck an emotional chord in me. I believe it's this very spirit that could help us work our way out of our economic mess. Americans helping Americans is what we need to succeed.
But when it comes to the world of small-business lending, I don't see this spirit very often. Sometimes at Multifunding, we have to work with lending shops where there are dozens of employees in a room working to lend money to small businesses at annual percentages of 60 to 80 percent. The shops are backed by venture capitalists. Hedge funds lend them money, and they're having a field day in the current economy. They say they are providing a service by making it easier for businesses to get financing, and t hey are â€" but at a big price.
Other times, we hear stories of small-business owners who are the victims of unscrupulous loan brokers. They have paid $2,500 for a business plan they didn't need, or they have paid for credit repair services even though their credit scores were above 700. Sometimes, that $2,500 is the last money they have.
The stories get tougher. Occasionally the workout groups at banks call us to try to help clients they no longer want find a new (and more expensive) lender. Many times these small-business owners take 18 percent interest loans in the hope that they will provide one last chance; often, the alternative is to just shut down the family business. The decisions are tough â€" and very personal.
Two days ago a woman called from rural Alabama because she was trying to open a retail store. She had $8,000 she wanted to put down on the business and was hoping to borrow $100,000. Her plan was to buy a buil ding for $65,000 and use the other $35,000 for working capital and to stock up on inventory. I sent her back to the drawing board and told her to find a place to rent, and then maybe think about buying a building once her store was up and running. I could tell she was shattered. I had about seven seconds to absorb her reaction before the phone rang with the next challenge.
The other day, however, was special. We hosted an event for Valley Green Bank in Philadelphia, which we gave an “A†for small-business lending on our Banking Grades scorecard - a grade that qualified Valley Green for one of our 2012 Small Business Bank Awards.
More than 2,500 banks have received an A grade on bankinggrades.com. The grade means the banks used at least 25 percent of their domestic deposits to make small-business loans. We picked Valley Green for our first awards ceremony because it is the A bank that is closest to our office and it is the largest bank in Philadelphia County t o receive an A.
Several of the bank's customers came to the ceremony and shared stories of the businesses they started with Valley Green's help. The food co-op from up the street brought plums from local farmers. The new Hispanic radio station in Philadelphia was present. We had a high-end car parts wholesaler and a woman who had quit her job to provide business and operations support to her husband, an inventor. Everyone there had received a loan from the bank.
These weren't the businesses with $20 million in revenue that the big banks like to call small businesses. These were true small businesses and entrepreneurs who have been fighting the fight since the Great Recession and have been able to do so, in part, because they were fortunate enough to find a lender who was willing to offer them reasonable rates. There was a true sense of community in the room as they shared horror stories, laughs, business cards and cake (see photo).
Americans helping Americ ans. I will hold onto this memory as we try to survive our endlessly depressing political season.
Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.
