Contributing to Small Business Success

NJ’s financial institutions, EDA and SBA programs, help meet small business lending needs.

For many, New Jersey’s business community is defined by the Fortune 500 companies headquartered here, including Johnson & Johnson, Prudential Financial, Merck and Honeywell International. All are brands recognized worldwide. While the big names often dominate the headlines, it’s the small business sector that perhaps more closely reflects New Jersey’s working class image.

The 2017 Small Business Profile, compiled by the US Small Business Administration’s (SBA) Office of Advocacy, contained mixed news about the state of New Jersey’s economy, but was very clear in detailing the impact of small businesses on economic activity and employment.

According to the report, in the second quarter of 2016, New Jersey’s economy grew at an annual rate of 1.7 percent, which was faster than the overall US growth rate of 1.2 percent. The unemployment rate, however, was 5.0 percent, above the national unemployment rate of 4.6 percent in November 2016 and up from 4.8 percent at the close of 2015.

The report further illustrates the size and diversity of New Jersey’s small businesses. There are 237,187 minority-owned businesses among the state’s 843,989 small businesses. Small businesses represent 99.6 percent of total businesses and 92.2 percent of the state’s exporters. They also employ 1.8 million New Jerseyans, or 50 percent of all New Jersey employees.

To meet the lending needs of small business owners, start-ups and entrepreneurs, New Jersey’s financial institutions are participating in New Jersey Economic Development Authority (EDA) and SBA lending programs and providing both traditional and innovative products and services that benefit small businesses providing everything from retail products and healthcare assistance to construction, education, transportation services and more.

Thomas J. Shara, president and Chief Executive Officer of Lakeland Bank, says it’s critical to support the small businesses within the bank’s footprint. “By doing so, we help ensure that the towns and communities where these businesses are located will grow and prosper,” he adds. “That’s incredibly important to us since our colleagues, families and friends live, work and play in these neighborhoods too. We all reap the rewards when our local markets are economically sound and growing. If our customers are successful then we are too.”

EDA & SBA Programs

Lakeland Bank, which has seen the number of small business loan requests processed increase by 147 percent over the past six years, participates in the SBA’s 7(a) Loan Program that allows the bank to lend up to $5 million per borrower in situations where the business would not be eligible for conventional financing. The SBA will guaranty up to 75 percent of the loan amount. That allows Lakeland and other participating lenders to overcome hurdles like higher loan-to-value ratios, lower personal injections or start up situations.

Additionally, Lakeland Bank participates in the SBA’s 504 Loan Program, in which banks partner at 50 percent of the loan request with a Certified Development Company (CDC) funding 40 percent of the loan request, allowing the small business owner to invest as little as 10 percent in a new project for the financing of real estate, machinery and equipment.

TD Bank also participates in SBA loan offerings including the SBAExpress Loan, 7(a) Loan, 504 Loan and the USDA Loan (agriculture), Nick Miceli, TD Bank’s market president-commercial, notes. “This means we can assist a range of borrowers from entrepreneurs to organic farms to established mom-and-pop businesses through lines of credit, commercial mortgages, equipment loans, franchise loans and more.”

Miceli points to a $3.5-million SBA 504 loan for the expansion of the Primrose Day Care facility in Florham Park. Primrose describes itself as “a national system of accredited private preschools that provides a premier early education and child care experience for children and families.” On their website, franchise owners Nisha and Rocco Varma say they are “passionate about educating our youth for a better future, and value the importance of the high-quality, educational child care that Primrose Schools provides.”

Miceli says the deal reflects TD Bank’s commitment to investing in businesses that provide needed services to our communities. “The hardest loan for a borrower to get is its first loan, but through TD’s efforts in New Jersey and across our footprint, the number of SBA loans TD is making has nearly doubled in 2017, and many of those are to start-up businesses,” Miceli adds.

In addition to being a Preferred Lender with the SBA, TD Bank is a Premier Lender with the EDA, offering a full suite of financing programs for small businesses. Valley National Bank is also very active in various programs with EDA.

The bank has provided financing for companies in conjunction with both EDA participation programs as well as using EDA guarantees. Daniel Sorrell, first vice president – team leader, NJ Community Lending, says the EDA programs enable Valley to make loans that may not otherwise have been made, and in some cases, to provide more aggressive terms, that allow the borrower to maintain cash reserves to fund growth. Loan types include real estate acquisition and renovation, term loans for moving costs, equipment purchases, leasehold improvements, etc., as well as lines of credit for working capital purposes.

“Valley has provided funding to companies moving into the state of New Jersey that have been awarded tax credits through the EDA,” Sorrell points out. “The bank is also a significant lender in SBA 504 loans, and we are looking to refocus on the SBA 7(a) Program for start-ups and existing small businesses in tandem with the introduction of our new small business credit card which provides quick and easy access to funds for day-to-day operating expense needs.”

While Manasquan Bank is not a Preferred Lender under the US Government’s SBA program, if a borrower profile is best suited for one of the SBA programs, the bank will support and underwrite a loan utilizing the SBA. Similarly, Manasquan Bank will participate, with its borrower, in EDA programs should that be determined as the appropriate path to obtain credit. “By providing credit plan flexibility, Manasquan Bank can be a single source solution for the credit requirements of the entire small business sector,” Mark F. Beriault, executive vice president, notes.

Traditional Loans, New Ideas

Like other financial institutions that participate in EDA and SBA lending programs, OceanFirst Bank also provides a wide selection of depository, cash management and loan products tailored to small businesses, including a multi-year line of credit, terms loans for equipment and mortgage loans for property purchases and refinances.

Joseph J. Lebel, executive vice president and chief banking officer, says most of the businesses that bank with OceanFirst have a borrowing relationship. “Many of our small business clients are closely held companies or family-owned businesses that have established relationships with their local OceanFirst branch along with their lending relationship manager and appreciate our commitment to deliver consistent and reliable service,” Lebel adds. “Whether an OceanFirst customer is interested in a line of credit to help manage cash flow or needs a large term loan for a major expansion of their company, they know they can count on professional guidance that supports the overall success of their business.”

In addition to small business lending, TD Bank offers small businesses everything from merchant services and business checking to investment products and foreign exchange services. Manasquan Bank provides a full complement of small business lending programs including commercial real estate, working capital lines of credit and term loans for the acquisition of equipment, software, business expansion or acquisition.

Besides direct lending to small businesses, Valley has recently expanded its commitment to the small business community by increasing its participation in the small business lending pool of a New Jersey non-profit organization. The non-profit uses funds borrowed from Valley, as well as other sources, to offer small businesses loans to borrowers that may be unable to obtain conventional bank financing. Valley has been a participant in the pool, at various levels, for almost 25 years and has now increased its participation from $155,000 to $1 million.

Valley National Bank also offers a wide range of products specifically geared towards customers in low and moderate-income areas, including lines of credit, term loans and mortgages that feature advantageous interest rate pricing and fee/loan structures that are designed to help foster business activity within these communities.

Overcoming Challenges

One of the most common problems for small businesses is understanding how to seek the best financing. Many small business owners have never had a need for financing before, and when they reach the point that they do, they need access to capital quickly with minimum time and effort so they can continue to operate and grow their business. “Time is a small business owner’s most precious resource and it can be wasted while they try to sort through conflicting information about banks, online lenders and the variety of products available,” Shara points out.

A recent survey by TD Bank of small business owners across the country shows that the most common reasons for being turned down for a loan are a poor personal credit score, a high debt-to-income ratio or low business revenue. Realizing that the process of applying for a small business loan can be confusing and complicated, the bank streamlined its application and increased the number of small business financial education seminars, conducting nearly 60 to date this year in New Jersey alone. The seminars cover the importance of maintaining or repairing personal credit, demonstrating sufficient cash flow and the benefits of lines of credit, term loans, leases and mortgages.

James S. Vaccaro, chairman, president and CEO of Manasquan Bank and chairman of the New Jersey Bankers Association, says the entire banking industry is responsible for providing counseling tools to small business that help them better understand what constitutes a “bankable” request. The form of advice ranges from one-on-one meetings with business principals and their professional advisors, to seminars for bankers to educate them on some of the challenges of small businesses.

“Manasquan Bank and the New Jersey Bankers Association firmly believe that small business lending is a most critical component for the support of general economic growth,” Vaccaro concludes. “Small businesses often do not possess a robust business plan or road map, which details their business strategy. The formulation of such a plan would enhance their ability to effectively tell their story to prospective investors and lenders.”


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