One on One is a weekly feature offering excerpts of interviews conducted by The Evening Sun with business leaders. Catherine Borden Killian is the regional administrator for the U.S. Small Business Administration for the Mid-Atlantic Region and oversees all SBA programs and policies in Pennsylvania, Delaware, Maryland, Virginia, West Virginia and Washington.
Q.As the recession is ending, what issues are critical to small businesses, particularly in the Mid Atlantic region?
A.There are always issues that are critical to a small business and one of our regional priorities is to increase our loan volume. We want to increase the number of banks who participate with us and get more activity out there. A lot of that is outreach, sometimes people don't know we are an option. Sometimes banks don't realize that there are distinctive ad vantages to working with SBA in terms of being able to offer your customers longer term loans. We are not a low interest rate agency, but we can offer terms much longer than a normal bank standard would offer. We can offer terms of 7 years for working capital and up to 15 or 20 on real estate, which is unusual in the commercial lending environment.
Q. What is SBA's mission?
A. Basically, the agency's mission is to help people start small businesses grow, and survive if they are having problems. And, in addition, in this day and age we want to help them not only grow but to grow globally. That is the challenge .
Q. Critics have suggested that SBA has moved away from its mission. Is that true?
A. Not as much move away as maybe segment ourselves too much into divisional or constituency-oriented things. What we need to do is refocus all the employees.
Q. What's the advantage of offering these longer term loans?
A. When someone is starting out, a short term repayment is very hard. If you can stretch out those payments over time, it gives the business the ability to get the financing.
Q. You mentioned your loan volume. What is the loan volume?
A. In this area, actually, we are doing very well. It's more than 100 loans this year so far and I think it was up about $28 million, that was just Maryland, not counting Montgomery and Prince Georges County because they belong to the Washington district, which again is doing pretty well. The last time I looked at their figures it was up around $20 million as well, that includes the whole district as well as Northern Virginia and Southern Maryland. Our region is not as high in loan volume as most others. This region is very high in federal procurement zTC assistance as well as our minority small business programs. We have the largest portfolio of 8A companies in the nation.
Q. What does that total?
A. It's about 750 in this region.
Q. But you contend that the loan volume is low ?
A. Low considering the population and the small business numbers in this area. A lot of that is just that we haven't convinced the banks that it's good business to work with us. I think it has been a lot of mergers and other things going on within the banking community that has slowed down some of the participation.
Q. Ideally, what do you think the loan volume should be?
A. I don't know the ideal number. We are doing some surveys and things now, but I would think if you wanted to track say, small business population and population, we have, in the five-state region, about 10 percent of the nation's population, but we have only 4 percent of the loan volume. I would like to see it sort of correlate a little better.
Q. Generally, what prevents banks from participating with you.?
A. That's what we really haven't discovered. We are doing a lot of surveys. I know some just don't even know about us. Some of the real small banks frankly think it's just too much paperwork or something like that. I think they're wrong. I hear varied opinions on that. One banker told me, no bank in it's right
mind should make a loan without doing what we require. But other bankers say we have too many paperwork burdens. I think it's more marketing to let people know. And once you do a couple it becomes sort of routine. Our average loan has been in the $100,000 range. There has been a lot of new growth in service industries and they are harder to collaterize and secure. They usually don't need as much money and banks are fairly reluctant because of their internal costs to make loans for less than $50,000. So we are trying to encourage them to make smaller loans. We have a 2 percent fee for our loan program, so we will split that with the bank in order to encourage them and give them a little incentive to make the smaller loans.
Q. So are you working on ways perhaps to streamline some of the paperwork?
A. We've done that. Over the last 10 years we've really worked hard to do a lot of that. I think we could probably go a little further.
Q. What is the default rate?