Economy is finally looking up for small business, says local SBA
This article first appeared in the St. Louis Beacon, June 18, 2013 - As St. Louis counts down to participation in National Small Business Week, Dennis Melton, director of the local Small Business Administration office in town, feels the area’s economy is looking brighter for the little guy.
“My take on the local climate is that it is on the rise,” he said. “There is an awful lot going on that hasn’t in the past. It’s probably the best time ever to be an entrepreneur.”
This city is one of four outside Washington, D.C., which will host events during the week. Seattle will hold its conference today while Dallas is set for tomorrow. St. Louis will participate in activities Wednesday to be followed by Pittsburgh on Thursday. The focus will then shift to events in the nation’s capital on Friday and Saturday.
Moreover, a prime role at the D.C. gathering on Friday will go to St. Louisan Jack Dorsey, a founder of micro-blogging site Twitter as well as Square, which allows merchants to scan credit cards using cell phones. Dorsey will discuss best practices for small business owners with SBA administrator Karen Mills in a talk webcast nationwide.
Locally, events will be held at Harris-Stowe State University from 8 a.m. - 2 p.m., Wednesday. Topics will include finding capital, details of the Affordable Care Act and entrepreneurship for new Americans. Mills will also hold a discussion with the chairman of World Wide Technology, David Steward, during Wednesday’s plenary session.
Melton said he’s happy the Gateway City was one of those selected to participate and feels Steward’s session will be especially rewarding.
“He started with SBA assistance and he’s going to talk about the program and how it allowed him to become the largest African-American-owned business in the world,” said Melton.
While business climates can be hard to gauge, Melton notes that small business lending in his office, which covers Missouri’s 54 eastern counties, is up by about 38 percent this year.
“Money is becoming more available,” he said. “People are getting access to capital, which is key to starting a business. There is a lot of support out there right now.”
Melton said manufacturing seems to lead the pack in lending with fiscal year-to-date figures from October through February showing $16.8 million in loans to the sector. Accommodation and food service were next at $11.6 million, with transportation and warehousing more than $8 million. About $7.4 million in loans went to health care and social assistance.
The lowest amounts went to arts, entertainment and recreation at $1.9 million and real estate and education services each of which totaled under a million.
Because different businesses have different capital requirements, Melton said it was difficult to judge if a particular sector were lagging. Some areas, like real estate investments, might seem smaller simply because many endeavors in the field, such as house-flipping, are considered speculative and ineligible for SBA loans. The agency also sometimes categorizes loans in ways that may not show all aspects of a transaction’s effect on different sectors.
“If we’re doing a loan for a doctor’s office, it might be a real estate loan, but we’re going to categorize that as medical,” he said.
Melton said that, as of May, $131.7 million had been dealt out to small businesses putting the SBA on a pace to break 2011’s record of $211 million, a total he said was boosted by various incentives Congress implemented at the time.
“We’re coming out of a pretty difficult time period in terms of the recession,” he said. “Companies that really had pent-up demand are starting to grow now.”
He said the economy wasn’t as healthy as it should, but it was good news that it is seeing some expansion and borrowers are showing a better balance sheet than in previous years.
“The return of the housing market has helped a lot,” Melton said. “That’s increased the dollar value as many homes have begun to recoup value lost in the recession.”
American real estate woes were the genesis of most of the meltdown in 2008. Melton said that the sector’s recovery will play a role in the healing process because there are so many dependent industries that were affected.
“When the housing market was absolutely dead, businesses such as floor traders were having a very difficult time. They weren’t selling carpet. They weren’t selling tile. They weren’t selling things you may not think about coming out of a floor store that go into new home construction,” he said. “HVAC companies were having a difficult time if they dealt in new construction.”
“Conversely, those that were dealing primarily in residential repair were doing pretty well,” he added.
High-technology and cutting edge businesses are often on the front pages, but Melton hopes the good news will carry over to the lower-profile retail sector as well.
“That’s what makes your quality of life better,” he said. “You want to have a dry cleaner in your neighborhood or a convenience store. Those people are every bit as important.”
In any case, Melton is proud of the role SBA plays in promoting capital formation.
“A banker by nature is cautious. An entrepreneur is a risk taker,” he said. “Someone’s got to bridge that gap.”