Growing businesses still find capital hard to access

Some owners of midsized businesses – those in the $1 million-to-$10-milion range that are a few years beyond the startup phase, but not quite mature – said they have had difficulty securing capital and taking their business to the next level in Rhode Island – although bankers don’t necessarily agree.
Creating more access to capital and to training opportunities for those midsized businesses would help grow the state’s economy, said Martin King, CEO of Gurnet Consulting, a 5-year-old East Providence business that assists companies in developing and executing technology strategies
King knows all too well the struggles of the in-between phase – he’s been there, done that.
“We’re beyond that now, but it was difficult about the third year. It’s that sort of ‘tween’ phase,” he said. “At that point, you’re starting to be successful, but you haven’t quite figured it all out, so there could be more risk,” said King, who launched the company on his own five years ago and now has 47 employees.
“Your company is 3 years old and successful and you’re hiring. Then there’s that convergence,” said King. “You’ve grown the company to be big enough to be hit with taxes, big enough to start worrying about regulations and at the same time, I may need a little help with access to capital. When a company is at that level of risk, you may not be able to get the funding.”
As technical consultants, a substantial part of the company’s money has to be invested in keeping employees ahead of the curve.
“We’re a consulting firm, so the biggest thing for us is that we have to have access to capital to create intellectual capital,” said King. “Knowledge is our currency.”
Efforts to get state workforce development grants for training were unsuccessful in the company’s second or third year, King said.
So, unable to hire employees with potential and train them, he had to buy the talent.
“We hired people who were up to the level we needed them to be and who had the experience we needed,” said King. “Once we had that intellectual capital in-house, we started creating our way of delivering our services.”
Paying those high-level employees was done “the old-school way,” said King. Gurnet Consulting got over that difficult phase, which was about three years into the company when it was seeking funding from a few banks and being offered terms that were mostly unacceptable, said King. One bank finally came through with a line of credit that allowed Gurnet Consulting to grow to the next level.
The midsized nature of a business isn’t an issue in access to funding, said Coastways Community Bank President and CEO Bill White.
“We haven’t noticed any difference between small, medium and large companies,” said White. “The rules are the same for all three kinds of businesses.”
Coastways Bank’s commercial lending, as a matter of fact, has increased across the board, he said.
“We’re up about 10 or 15 percent in commercial loans over the last year, both in terms of amount and number of loans,” said White.
Lending decisions obviously depend upon the viability of the business, he said.
“I don’t know that we want anything that’s speculative in nature,” said White. “That sometimes goes back to lessons learned from the past.”
Scott Davis has heard a lot from banks about “speculative” projects lately, mostly in regard to his latest development effort – renovating Fuller’s Mill, on the banks of the Blackstone River in Pawtucket, into live/work space.
“I know I can’t get funding because it’s very speculative,” said Davis, who owns Rhode Island Antiques Mall in Pawtucket and other real estate in Massachusetts.
Davis bought Fuller’s Mill, which was the Geo. H. Fuller & Son Co., founded in 1858, which produced parts for jewelry, a couple of months ago and is now aiming toward the next step in its development.
Davis’ other successful businesses, including the antiques mall, haven’t influenced the banks to lend him the $2 million to $4 million required to gut and build-out the mill into live/work space, with some possible retail, he said.
“I’m just speed-dating with bankers right now, getting together with them and talking with them about my ideas,” said Davis. But ideas haven’t been convincing enough for bankers.
“It’s very difficult for smaller developers to get money,” said Davis. For now, Davis has moved his new entity, Fuller Mill Realty, and some of his business for the antiques mall into an office at Fuller’s Mill. He will develop, out of his own funds, architectural plans and financial projections and go back to the lenders with more specific plans.
Davis finds that being an experienced businessman having difficulty getting capital to invest in redevelopment is rather ironic, from his perspective as a board member of Pawtucket Business Development Corporation, a quasi-governmental nonprofit agency that loans HUD money to small businesses.
“The Pawtucket Business Development Corporation typically loans up to $100,000 to small businesses that have difficulty obtaining conventional financing,” said Davis. “We are desperately trying to find people to loan that money to.
Other things besides being a midsized business can be a barrier when it comes to access to capital.
“I work with the small-business community in Pawtucket and Central Falls, and for some of the mom-and-pop shops, language is a barrier,” Sandra Cano, a community-development specialist for Navigant Credit Union, told an economic-development breakout session at the 2013 Economic Summit held on Nov. 15 in Warwick.
A state website, the First Stop Business Information Center, has lots of valuable information, but the language barrier on that, as well as on notices sent from local city halls or certificates from the state health department, leave some of the small businesses up against the wall, Cano said.
To get the available funding and other resources to small businesses, the state website “has to be streamlined,” East Providence Area Chamber of Commerce Executive Director Laura A. McNamara said at the economic summit.
“It should have a drop-down menu for a startup business. It should be user-friendly,” said McNamara.
Clarifying state and other resources will be a positive step for businesses of all sizes, she said
“There are loans for midsized business,” said McNamara. “But some business owners have found the loans for the midsized businesses to be lost in the mix of loans for startups or major corporations.” •

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