Based on what she's seeing among Capital One's more than 3 million small-business customers across the country, Keri Gohman is upbeat.
Business owners are reporting better earnings and reinvesting in their businesses, and that's translating into a rebound in loan demand, says Gohman, the head of small-business banking at the McLean, Virginia-based bank, which has dozens of branches across Long Island.
But there's still caution out there. When it comes to reinvesting, many small business owners are taking advantage of cash they set aside. "We're seeing them coming back from the recession smarter and more thoughtful about their business plans," says Gohman.
How has your small business lending grown since the recession?
We went through the Great Recession and we saw our business owners really pull back. We saw that reflected in small business sentiment. They were concerned about the future. We saw them begin to save their cash. As the economy has started to improve, we've seen their earnings begin to recover, we've seen them begin to reinvest in their businesses. Not all business owners are using loans to invest; some are taking advantage of the savings they set aside. Many don't want to become too leveraged. But we've seen our demand pick up. Our application levels are at pre-recessionary levels.
Are you concerned that some companies may borrow too much?
No . . . We have business bankers who are expert in credit management and who are specialists dedicated to working with our small business owners. We spend time talking to owners about whether now is the appropriate time, whether it's something that might be appropriate down the road and how to prepare for it. Or how to structure a loan. It's in our best interest to partner with small businesses to make sure they are making well-informed choices . . .
"They don't want to be overextended either. We see business owners looking for lines of credit, which have a lot of flexibility. And many owners at an earlier stage of their business or who are just starting to rebuild their business [after the recession] might take a smaller line of credit and then begin adding to it as they get a more established track record or feel more comfortable taking on more credit risk. Another part of our business growth is in loans backed by the Small Business Administration. They help us provide loans to companies that might not otherwise qualify for a conventional loan.
What happens when a loan officer at a branch encourages a company to seek a loan but underwriters then reject the application?
The process starts with our understanding a small business, its business plans, its goals, how it has performed historically. That's the local relationship. We view our loan officers, our team members that are working with the business owner on a day-to-day basis as part of a team. They'll communicate with a team of underwriters and a team of support professionals. All of us have a goal to make a responsible decision for that customer.
"If we can't do a conventional loan, we see if there is a way to make this work with an SBA-guaranteed loan. We also have a huge number of [small loan program] partners like Kiva, like Accion, and we'll partner with them to see if they can help that business owner if they're not quite ready for a conventional loan.
If they're not ready for a loan today, how do we make sure if they want a loan in the future, they make sure they're prepared?