POCATELLO — Most of the small local businesses that are struggling right now have one thing in common: they need capital and they’re having a hard time finding a bank to lend it to them.
That’s the message that came out of an informal panel discussion Tuesday that included local business and economic development leaders, as well as representatives of local government and Idaho’s federal delegation.
Local business leaders said that while there are several positive things going on in Pocatello and Chubbuck, there’s no getting around the fact that small businesses are hurting and many are struggling to stay afloat. The key is lending.
“That’s the problem,” said Tom Maydew, executive director of Idaho’s Small Business Development Center in Pocatello. At the request of Sen. Jim Risch, R-Idaho, Maydew organized Tuesday’s meeting, which was held at the Rosewood Reception Center on Bannock Highway. Even with several federal programs in place designed to spur banks to loan more money, “They’re still not loaning money,” Maydew said. “None of those programs work without a bank.”
“You’ve got to find a way to get lending going again,” Cory Phelps of the Eastern Idaho Development Corp. told Risch representatives. “That’s what hampers most small businesses. They can’t get money the way they used to.”
Maydew said small community banks didn’t need a bailout, but it’s those banks that are feeling the hurt because of federal regulations that have tightened up lending restrictions because of risky practices by the megabanks.
Everything Congress is doing right now on the financial front is geared toward larger banks, he said. “They’re really ignoring all the small, local guys.”
New rules written for the big banks have affected the lending ratios of smaller banks, said Gynii Gilliam, executive director of Bannock Development Corp. In turn, “That hampers their ability to help small businesses,” she said.
“I’m really worried about our small community banks,” said Matt Hunter, executive director of the Greater Pocatello Chamber of Commerce, which represents about 800 businesses, 90 percent of them small businesses.
Skiffington Holderness II, Risch’s legislative assistant, said regulatory organizations are being very stringent on what banks can lend for and how much they can lend. As a result, banks are leery about lending too much because they’re worried Congress will pile more regulations on them.
“They are being much more stringent now than they were three years ago,” he said about federal regulators.
Holderness said a bill that would establish a $30 billion fund specifically to help small community banks has stalled in Congress because Democrats want to borrow the money, which would add to the deficit, while Republicans want to use stimulus funds to pay for it.
“There is a fight in Congress right now over where that money should come from,” Holderness said. “But everybody believes there should be a bill to help small banks in America.”
The good news, some panelists said, is that businesses are looking to expand even if they’re having a hard time finding capital.
“We’ve seen an increase in businesses looking for capital,” said Samantha Damron of the EIDC, which was formed to stimulate the Southeast Idaho economy by providing loans.
“Now is the perfect time to expand a small business,” Damron said. “But there are so many mixed signals right now, small businesses don’t know whether to (expand or not).”
Maydew said the SBDC has worked with 115 people in this area over the last eight years who have reached the point of developing a business model and launching a new project.
“We still have lots of folks looking to kick tires on a project,” Maydew said. “But they need capital; that’s the problem.”
Panelists made a point of emphasizing that while the economy is definitely hurting, there are a lot of good things happening in Southeast Idaho.
“I’ve talked to a lot of local business owners and they’re all just swamped with work,” said Chris Nelson, a small business owner who owns the Rosewood Reception Center. “A lot of them say they’re so busy they can’t hardly believe it.”
“There are definitely some good things happening,” said Gilliam, who pointed to ON Semiconductor’s recent expansion as well as news that businesses are looking to locate near the Pocatello Airport.
But Gilliam added that while it’s true a lot of businesses in this area are busier, so far that isn’t translating into more jobs.
“They are busier, but they’re not adding workforce,” she said. “Everybody’s reluctant to make that full-time employee commitment."
August 18, 2010