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Local banks see small-business lending surging

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Chase and Fifth Third Bank opened their small-business loan spigots in Indiana late last year in a sign the economic recovery is taking hold among the state's smaller businesses.

Other banks, such as Old National Bank, suffered another decline in small-business loans last year, but say the pace is ramping up this year, as companies get more aggressive on expansions, capital expenditures and even acquisitions.

"A lot of people were sitting on the sidelines, waiting to jump back into the game," said Tim Oliver, head of New York-based Chase's business banking in Indiana, which handles loans for companies with $20 million or less in annual revenue. "I think people are much more confident today than they were back in that 2009 time frame. They’re seeing a lot more positive signs that things are really starting to recover."

Local bank lending to smaller companies peaked in 2007 and 2008, then took a nosedive after the September 2008 meltdown on Wall Street. But the federal government declared that the recession ended in mid-2009, and the economy has been recovering very slowly since.

Even unemployment has started to trend downward in recent months, slipping below 9 percent nationally in March. Unemployment stood at 9.4 percent in Indiana as of February, the most recent figure available.

Chase's loan volume to its smaller corporate clients surged 57 percent last year, to $263 million, after taking a big plunge in 2009. The bank said it could not provide Indiana figures for 2008 because it did not track small-business lending by state before 2009.

The pace of small-business lending is just as hot this year, Oliver said.

Fifth Third saw a similar increase—56 percent—in its loans to Indiana companies with $20 million or less in annual revenue. The Cincinnati-based bank declined to disclose its total dollar amount of small-business loans, but said it is expecting another 50-percent increase this year.

"Companies have been hoarding cash. Now that we’ve seen positive signs in the economy, a lot of those companies are starting to invest in upgrading equipment and hiring new people," said Todd Flick, a senior small-business lending executive for Fifth Third in Indiana. "They’re willing to spend some of the money that they’ve got on their balance sheet and that they’ve got on deposit with the bank."

Randy Reichmann, president of the central Indiana region for Evansville-based Old National, said he saw business owners get more confident a year ago, but then get fearful again after the financial crisis in Greece spooked markets worldwide. Late last year, things started to pick up again, but not in time to spare Old National from a 3.3-percent decline in its small-business lending, which aims at companies with $5 million or less in revenue.

The bank's loans to those companies last year totaled $163.2 million, down from more than $172 million in 2008. But, this year, things are definitely growing. Reichmann expects to see businesses start borrowing again for new equipment and real estate purchases.

"They’ve cut a lot of expenses out. It’s making deals easier to get done," he said. "I think there’s a tremendous amount of pent-up demand for capital expenditures. That’s on both small and large businesses."

Local banks are hiring more to deal with the rising loan volume. Chase added six bankers to Oliver's small-business team this year—now 32 strong—and expects to add another six by year's end. Meanwhile, Fifth Third has hired two new people to help with underwriting loans and three new bankers. It also expects to hire one more banker by year's end.

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  • small biz lending & bankruptcy
    One of the tragic aspects of small business bankruptcy is that lending has been so tight, so that business that might have survived did not. With the availability of loans improving, I see more hope for successful emergence from bankruptcy, rather than it meaning the end of the story.

    Clara
    Indianapolis Bankruptcy Law Firm

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