Wells Fargo launches lending push for small businesses

Bank aims to offer $100 billion in new loans over the next five years

tadams@ledger-enquirer.comJune 15, 2014 


    Here are a few facts from the U.S. Small Business Administration:
    - The 23 million small businesses in America account for 54 percent of all U.S. sales.
    - Small businesses account for 55 percent of all jobs and 66 percent of all net “new” jobs since the 1970s.
    - The 600,000-plus franchised small businesses in the U.S. account for 40 percent of all retail sales and provide jobs for some 8 million people.
    - The small business sector in America occupies 30 to 50 percent of all commercial space, an estimated 20-34 billion square feet.
    - The small business sector is growing rapidly. While corporate America has been “downsizing,” the rate of small business “start-ups” has grown, and the rate for small business failures has declined.
    - The number of small businesses in the United States has increased 49 percent since 1982.
    - Since 1990, as big business eliminated 4 million jobs, small businesses added 8 million new jobs.

There are roughly 23 million small businesses operating in the United States. That trickles down to a little more than 4,000 in the Columbus area.

Wells Fargo, a distant second to Synovus and Columbus Bank and Trust in the local market in terms of deposits, is the fourth-largest bankholding firm nationwide with its more than $1.5 trillion in assets.

The San Francisco-based bank with the stagecoach logo has launched a goal to lend $100 billion -- on top of existing loans -- by the year 2018 across the country.

The effort, dubbed "Wells Fargo Works for Small Business," includes a new website and an emphasis on expanding various lines of business with commercial customers.

"Small business is the backbone of our country, and we understand that," said Sean Mabey, Wells Fargo's regional small business strategy director. "More people are entrepreneurs now than anytime ever, and that is why these folks need help. There are businesses that survived that have never operated in a post-recession economy. And new businesses that have just never operated."

The bank did not break down how much of the $100 billion in small business lending might go to the Columbus market. But Greg Allmendinger, market president here, said small business lending rose 25 percent at Wells Fargo locally from 2012 to 2013.

In the first quarter of this year, there was a "pullback" in loan demand, he said, much of it pegged to uncertainty surrounding an evolving health-care environment and weather issues. The Columbus area itself experienced a rare blanket of snow, along with cold blasts and periods of rain.

"But most of the economic indicators you're seeing, and especially locally, unemployment's down," he said. "You see new business startups. You see expansion in some of the existing businesses. So we're moving in the right direction."

Both Allmendinger and Mabey said interest rates remain so low that there's never been a better time to seek out a loan for a new business or grow an existing venture. Wells Fargo economists are forecasting rates will begin to rise entering 2015.

"Rates are really too low to have a growing economy," Allmendinger said. "But when interest rates are low, it's the time to borrow. You've seen that not only in the mortgage industry, but in the small business industry as well. Now's the time to get fixed rates for long periods of time."

But, for a number of reasons, that isn't happening in the majority of the small business world, said Mabey, who noted surveys indicate only 40 percent of small companies intend to or have a desire to borrow.

"It's even less in the middle markets group," he said. "So you have to ask yourself why."

A quarterly Gallup poll commissioned by Wells Fargo shows small business optimism is about where it was in 2007. That was as the housing market and the U.S. financial sectors -- banks specifically -- were entering a crisis mode that would lead to the Great Recession from December of that year to around mid-2009.

"A lot of it has to do with health care, the unknown around it -- should I add employees, do I not add employees," Mabey said of the current lingering anxiety. "That also goes to capital and lending, whether they're even going to want loans."

Another national factor that often ripples down to the state level is the potential for more increases in the minimum wage, Mabey said. But he's not certain how deep the worry is over that issue.

"A lot of people talk about, 'I'm already paying my people over that (mandated wage), so I'm not really worried about it,'" he said. "A lot of people talk about it's just the right thing to do. A lot of people talk about, 'Hey, if the minimum wage goes up, I don't have to worry about other businesses trying to outpay me and losing my best people because of that.'"

The Wells Fargo executives said those issues are the backdrop for the bank's concerted effort to lend more money, set up online resources and hit the streets to let prospects know it can help clear out their financial and operational clutter.

They point to Wells Fargo's 80 different business lines and their attempt to use as many of them as possible in the market -- basic operating accounts, handling payroll, business insurance and debit and card-card transactions.

"We're able to meet all of his needs in-house, so he doesn't have to go somewhere else to meet all of his financial needs," Wells Fargo Area President Robert Horn, who oversees the Columbus market, said when describing a dentist client who has added services over time.

"The best way to do it is to go out and call and know the business owners in our area, get to know what's on their mind," Horn said of the approach his 80 local bankers are taking during the small business push. "And that's if they bank with us or not. Because eventually a business has a need, whether it's cash flow, credit or merchant services."

Mabey said a major part of the focus over the next several years will be to simply make the recession "survivors" and new entrepreneurs know what's available to them; in essence, to educate them.

"It doesn't matter whether it's Augusta, Savannah or Columbus, they've survived and now their No. 1 challenge is how do I go out and find more customers to do more than just survive?" he said. "How do I keep my cash flow moving? There is a lack of understanding and a lack of knowledge sometimes around how to do that."

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