Lending Programs Stimulate Meadowlands Economy

Local businesses are taking advantage of record-low interest rates

When education entrepreneurs Ed and Christine Imperiosi were trying to buy a River Vale preschool in 2012, they hit a roadblock. The sellers wanted 50 percent of the $925,000 asking price in upfront cash from the buyer, and that was more than the Imperiosis could manage.

But the sellers were ultimately persuaded to accept a deal that would involve 75 percent financing. The clincher: the Small Business Administration’s (SBA) 7(a) program would be involved. TD Bank administered the loan, which closed in October. Now the couple owns and operates Lily Pond Country Day School.

“With the SBA backing it and saying ‘yes, we’ll guarantee this’, [the sellers] were far more willing to sit down at the table, go through the details and get it done,” Ed Imperiosi said.

Lending programs target niches where banks and their partner institutions aim to grow business, such as in particular industries or geographic areas. When firms qualify, they are often able to open doors, secure financing or obtain terms that would not otherwise be available to them.

These days, growing numbers of Meadowlands area companies are doing deals, lenders say, by jumping at what lending programs have to offer. In northern New Jersey, JP Morgan Chase is on track to close this year twice as many loans involving the New Jersey Economic Development Authority’s (EDA) Statewide Loan Pool as it closed last year, according to Steve Necel, senior vice president for middle market lending in New Jersey.

Area banks are actively courting small business owners, in part by explaining how lending programs can help meet their needs. The Provident Bank of New Jersey, headquartered in Jersey City, opened a new commercial lending office with seven loan officers in Rutherford earlier this year. And Provident, which administers several SBA programs, is not alone in hunting for solid loan candidates.

“In the small business market, we are aggressively looking for new lending opportunities,” said Ken Nickel, senior vice president and manager of the community lending department at Valley National Bank. “But it is absolutely more difficult in this market because we deal in historic numbers: how has the business done? What has the business done in the past several years?”

Lending programs have been around for years, but they are striking a chord now in these times of slow economic recovery. While companies are salivating over record-low interest rates, they are still bouncing back from the recession and often cannot afford big down payments or hefty monthly bills on a short-term loan.

In this environment, local firms are utilizing lending programs that let them keep more cash in their pockets while also letting risk-averse banks limit their exposures. The SBA’s 504 program, for instance, requires only 10 percent down from the borrower in the purchase of real estate or equipment. And because the SBA covers 40 percent of the financing, a bank can close the deal while ultimately being responsible for just 50 percent of the purchase price.

“Anywhere in Bergen or Hudson County, the real estate is very costly,” said Chuck Casser, senior vice president for commercial lending at Valley National Bank. “So if that person who has an existing business or wants to buy a building only has to put down 10 percent, that makes it a lot more doable than if he goes to the bank and the bank typically wants 25 to 30 percent down.”

Lenders cannot always identify their clients in a news report, but they can describe success stories that trace to lending program initiatives. Consider the true tale of two food processors, both growing businesses in the Meadowlands with help from JP Morgan Chase and EDA programs.

Because food processors fall within the EDA Statewide Lending Pool’s target sectors, one firm was able to buy a building in the Meadowlands and relocate from Queens, New York, Necel said.

The other was being courted by Pennsylvania and New York to relocate, but will instead stay put in the Meadowlands. In fact, the firm is on track to add as many as 200 jobs through a $20 million expansion project. Key to the deal, Necel said, was the fact that the borrower could put down just 10 percent. Another 10 percent was financed through the EDA, thus allowing JP Morgan Chase to stay within its guidelines to lend no more than 80 percent of the total project cost. Result: all parties were satisfied and the deal got done.

If your business is growing, “you’re using [cash] to buy inventory and carry your receivables,” Necel said. “You can’t just take it out and put it in the building. So this [program] just allows things to grow without that stress and pressure.”

Lending programs are helping banks make business loans without putting excessive amounts of capital at risk. That is important, lenders say, in a time when low prime rates mean slim profit margins on their books and require conservative lending practices. By administering the SBA’s 7(a) program, a bank can rest assured that most of what it loans out comes with a federal guarantee.

“Without the guarantee, would a bank entertain this specific loan? Quite honestly, I don’t know if they would,” said Don Buckley, market president for TD Bank in northern New Jersey. “But the guarantee enhances it. It adds value.”

Each program has a distinct set of features. The SBA 504 program is limited to real estate and equipment deals. Most SBA 504 deals handled by Valley National exceed $500,000, Casser said.

The SBA’s 7(a) program offers more flexibility. It allows for working capital in financing operations, for instance. And if a company applies through an SBA preferred lender, such as The Provident Bank of New Jersey or JP Morgan Chase, it can expect a decision within two weeks, versus the standard one to two months.

“You can cut the approval process down substantially by being a preferred lender,” said Bruce Rossi, who oversees Provident’s SBA lending division. “It allows banks to make the credit decision and attach the SBA guarantee to the loan.”

To qualify for the EDA’s Statewide Loan Pool Program, a company must either be located in a targeted municipality or work in a targeted industry area, such as manufacturing or technology.

Not all programs have a public agency component. TD Bank, for instance, has a year-old program in New Jersey geared toward independent physicians, veterinarians and dentists seeking to borrow less than $1 million. This flexible program might help a doctor’s office acquire another physician’s practice, for instance, or buy out one partner’s stake in a group.

Another new TD Bank pilot program aims to help veterans become franchisees through relationships with 20 major companies.

For local businesspeople who are wondering if any program might fit their needs, bankers suggest running their situation by a lender who knows the landscape of what is available. Another good place to start can be the Hudson County Economic Development Corporation, which can assess a company’s qualifications for its programs and foster connections with partner institutions.



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Meadowlands Magazine

Meadowlands Magazine

Meadowlands Magazine, the official publication of the Meadowlands Chamber and its affiliate organizations, has proudly served the business community of the Meadowlands region for over 40 years. We are among largest business magazine in New Jersey (second by circulation) and offer prime visibility opportunities for businesses to connect with potential customers.

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