The 1990s were a smooth ride for All Occasion Transportation.
The Providence limousine business averaged 20 percent annual revenue growth since it started in 1990, according to company president Eric Weiner. Then came 2001.
With sales tied tightly to business travel and tourism, the economic aftermath of Sept. 11 stunted the company’s expansion. Revenue growth flatlined while expenses swelled 15 percent, mainly from an increase in insurance rates and gas prices.
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The company, which leases a garage in Cranston and a reservation center downtown, froze plans to purchase a new garage and office.
But those plans have thawed, thanks largely to a rebound in business travel. All Occasion Transportation is expected to close soon on a $265,000 loan for the purchase of a 30,000-square-foot property in Pawtucket, which will serve the business’ main office and garage.
“The convention business in Providence and Newport has come back significantly,” Weiner said. “We’re back to our peak of 2000.”
The planned expansion is just one example that small businesses might be in expansion mode.
Small-business owners are feeling more confident about the future than they have in more than a decade, according to a recent survey from the National Federation of Independent Business.
The NFIB’s Index of Small Business Optimism released last month shows nine of 10 measures improved in an August survey of small businesses. The overall score was the highest since the federation began its monthly survey in 1986.
Forty-two percent of business owners surveyed said it’s a good time to expand – a sharp increase over past months. The same percentage said they expect the economy to improve, and about one-third said they plan to boost capital spending on equipment, inventory or property.
Fourteen percent expect to hire more workers, while only 7 percent said they would trim jobs. And profit trends showed their best improvement since 2000.
All Occasion Transportation is one of a record number of small businesses in Rhode Island that borrowed money backed by the U.S. Small Business Administration during its 2003 fiscal year, ended Sept. 30.
The SBA’s Rhode Island office guaranteed a record 1,091 loans in the fiscal year that ended Sept. 30 – a 14 percent increase over 2002. In New England, the SBA guaranteed 20 percent more loans than last year. SBA lending nationally also posted record volume.
Part of the brisk loan activity can be attributed to the SBA’s new focus on backing smaller loans for a greater number of businesses. But economists and others also see it as a signal that owners are feeling more confident about the future.
“The last five month’s readings are sending a very clear signal that economic activity is on the way up,” said William Dunkelberg, the NFIB’s chief economist and author of the survey.
The only measure of the NFIB’s survey to fall was the outlook for interest rates and credit conditions. But after a protracted period of low rates coupled with sluggish demand, access to cheap capital might be somewhat insignificant in the context of a small-business recovery, according to Leonard Lardaro, an economist at the University of Rhode Island.
“The problem hasn’t been the cost of capital; it’s that there hasn’t been enough revenue and demand to make things profitable,” Lardaro said. “If you have a plant that’s only operating at three-quarters capacity and interest rates go down, you’re still not going to add capacity.”
An uptick in economic activity is likely to increase the number of new companies that are formed, Lardaro said, as entrepreneurs sense the timing is right to move on a business idea.
“There is a lot of wealth and income in Rhode Island, and there’s still money to be made,” he said.
Terrance S. Martiesian, director of NFIB’s Rhode Island chapter, agreed that it seems there is a growing number of people starting new businesses – especially white-collar workers who have lost their jobs amid multiple rounds of corporate layoffs.
“All those people have an expertise in something, whether it’s computers or advertising or whatever,” Martesian said.
But if there is a stumbling block to the renewed sense of optimism, it is the inexorable rise in health insurance costs, he said.
“That’s the one downside,” Martesian said.
“It’s the one thing that businesses can’t seem to gauge, is their increase in health care costs.”
He added, “There does seem to be a renewed sense of confidence but I can’t explain why.”
Lardaro mused that small-business owners might be buoyed by a period of relative calm following a recession, stock market collapse, Sept. 11 and the war in Iraq.
“Maybe (small businesses) are more confident because there has been some semblance
of normalcy,” Lardaro said. “Maybe they’re more confident than they should be.”
