Fewer Loans Means Fewer Borrowers
Opinions are split concerning the significance of plummeting federally backed loans to small businesses in Rhode Island:
“There is capital available today that you can access without the [SBA] guarantees,” said Kenneth B. Martin, executive vice president and director of business banking for the bank’s parent, Citizens Financial Group. “That is typically the case when you have a good economy and a very competitive banking landscape.”
In other words, the small-business loans offered through the SBA are being replaced by other types of bank loans that are often “less expensive,” Martin said, and therefore more attractive.
Not so, said Mark S. Deion, president of a business-planning consulting firm, Deion Associates & Strategies Inc., and a small-business advocate. He said that what appears to be a lack of demand is actually the result of businesses getting discouraged with banks.
“Let’s put it this way: If you know you’re going to get laughed at in the face, why ask?” Deion said. “People are using home-equity loans and their credit cards … and they’re paying 13 percent [interest]. The reason is it’s easier to get the money. … It’s the path of least resistance.”
Personally, I’d suggest that readers turn a few pages to my own “R.I.’s economic clock runs down,” which may persuade them that another possibility ought to be considered: that the strata of residents who would normally seek small business loans are fleeing the state. There are fewer of the sorts of people who could and would turn loans into profit and economic growth, which ought to weigh heavily on our minds as the state responds to people who live off of the economic stream that our government siphons away.