The struggle on LI for loans to grow small businesses

About a year and a half ago, Ira Rosenfeld and his partners at Bi-County Scale & Equipment made a pivotal decision.

Tired of renting their 7,000- square-foot facility in West Babylon, they sought to purchase it.

But their attempts to get a bank loan were denied -- a reality that Rosenfeld would face repeatedly in his quest to grow the 35-year-old business, which sells and services food equipment for supermarkets and meat markets. "I'm growing very slow [when] I should be running," says Rosenfeld.

Unfortunately, Bi-County's uphill battle to snag financing isn't at all uncommon. Faced with greater regulatory pressures, banks are scrutinizing deals much more carefully, often denying loans they would have once made.

"The lending market is still extremely tight, and many business owners are very frustrated with the process," says Dr. John Paglia, an associate professor of finance at Pepperdine University in Malibu, Calif. "It's frequently leading them to a situation where they don't have capital to fund their business operations."

Going a different route
Bi-County, which tried to get bank financing for not one but two building purchases, ended up having to strike financing deals with individual landlords to buy its facilities. The partners spent a year filling out bank applications, only to be denied by six lenders before ultimately securing a $125,000 line of credit this spring. It's been a far greater task than Rosenfeld bargained for.

"We pay our bills and have a profitable company, but that still wasn't enough for them," says Rosenfeld, the company president. Bankers say Bi-County, which has sales of nearly $4 million, had too high a debt load.

Part of the problem was that Rosenfeld and his partners, Tim Lynch and Irene Lo -- all former employees of the company -- inherited about $1 million in debt when they purchased the company from a previous owner in 2004, Rosenfeld says. They are also paying off two former partners -- employees who have since left the company. And they now own two buildings, one in West Babylon and one in Amityville.

They are trying to sell the Amityville building, which they purchased for $450,000 before they were able to snag a good deal on their existing West Babylon facility, and to avoid paying moving and renovation costs. On both buildings the landlords hold the promissory notes.

Despite being unable to get bank loans for either building acquisition, Bi-County did finally manage to get a line of credit with Bridgehampton National Bank to help pay for equipment purchases.

"It's a really great company," notes James Manseau, an executive vice president at Bridgehampton National Bank, adding that Rosenfeld has a good payment history. "You stretch as much as you can for these companies."

'Always busy'
Rosenfeld says Bi-County could still use a $250,000, 10- year loan to buy more showroom equipment and hire additional technicians and sales support. "We're always busy," says co-owner Lo, the purchasing and equipment manager. Bi-County gets about 700 service calls monthly.

They even turn away new business at times, because they don't have enough technicians to service the jobs, says Lynch, Bi-County's vice president.

"I'd like to meet the next businessman who is going to say no and turn down your business," adds Rosenfeld. "I do that on a daily basis."

They're paying down debt -- more than half of the $1 million is already satisfied -- and growing the company "despite the banks," he says, noting they service more than 2,000 clients including King Kullen and A&P.

"They're dependable," says Dan Lautt, a senior buyer with A&P in Montvale, N.J., noting if they have any warranty issues with manufacturers, Rosenfeld "always gets the problem resolved hook or crook."

Bi-County says it will continue to seek additional financing. "I'm looking to grow a good company," Rosenfeld says. "The banks are being shortsighted."