Three years ago, David Shanker decided he wanted to continue the legacy of his family's century-old business on Long Island. But first, he needed the money to make the goal a reality.
Shanker Industries, a maker and distributor of decorative metal ceiling tiles used in stores and restaurants, actually got its start on Long Island 116 years ago. Yet, for the last 30 years the company was based in New Jersey -- a business decision made by Shanker's father when he ran the company.
When Shanker, a Dix Hills resident, took the reins, he moved the company's main office to Lake Success, with the intention of relocating the entire operation back to New York. "We're from Long Island; I'd like to see Long Island prosper," he said. "So it was just a question of making it affordable."
As is often the case for small businesses, financing turned out to be the biggest hurdle. Shanker's 16-year relationship with a local community bank fizzled when it froze his line of credit during the 2008 recession. He began searching for a new bank to finance his move, and went to another local bank, as well as two larger multinational banks and a private equity bank, but was rejected all four times.
"We've had our ups and downs, but we always broke even or made a profit," Shanker said. "So we didn't think we'd have any trouble getting a loan."
Reasons for loan denialsSmall businesses are turned down for loans for a variety of reasons, not all of which have to do with the business itself, said Roz Goldmacher, CEO of the Long Island Development Corp. LIDC is a nonprofit that issues low-interest loans and provides small-business counseling.
"The lender has to have a diverse portfolio. If [Shanker] goes to a bank that has 100 percent manufacturers in their portfolio, that's going to be a problem," Goldmacher said. "The bank's lending limits are another issue."
And, of course, the business has to present a strong case for financing, she said. Shanker said some banks that rejected him expressed concern that the amount of collateral his company could put up for the loan wasn't enough to secure it.
On his sixth attempt at financing, Shanker was approved. Citibank gave him an $800,000 Small Business Administration 7(a) loan -- in which the SBA guarantees a portion of the debt, reducing the risk the bank takes on.
The availability of the 7(a) loan was a deciding factor, said Evan Babb, senior vice president at Citi Commercial Bank. Babb said the longevity of the business was also attractive.
Citi also helped connect Shanker with the Babylon Industrial Development Agency, which offered a $115,000 tax break on property taxes over the next 12 years for a building Shanker eventually bought in Deer Park. The facility opened in September with 15 employees -- nine of them new hires -- as Shanker's presses, one a century old, started up again, stamping out myriad designs on thin sheets of shiny metal.
Showing banks your Plan BPeter Appello, a manager for small-business banking at Capital One Bank's office in Melville, said one way to gain a bank's confidence when applying for a loan is to come prepared with solutions to a variety of situations.
A business owner should have an answer for when his company doesn't do well, but also a plan in case the business experiences unexpected quick growth, Appello said. "What happens if it really takes off, does it have enough capital to . . . grow?"
Shanker said he felt that simply not giving up got him through the rejections to eventually get a loan. He kept at his search for two years, and during that time managed to grow his business and pay down his old loans.
"I knew that I believed in my company. We've been around since 1896, we have a solid distribution chain, and we were profitable," he said. "I knew eventually we'd have someone say, 'This is a company that'd be worth giving a loan to.' "
At a glance
Shanker Industries, Deer Park
About $4 million