Seattle beer maker Elysian Brewing Co. announced a new factory complex last week that will mean 35 new jobs. It’s financed with access to a $5 million loan from the Small Business Jobs Act.
The Jobs Act, which makes money available at low rates for small business, was a good idea. Small busin
esses create the majority of the nation’s jobs, and that’s what the nation needs right now — more jobs.
The only problem is after complaining at first that they couldn’t get needed loans, small businesses are now shunning them.
A business survey in June by the National Federation of Independent Business reported that “91 percent reported all their credit needs were met and that they were not interested in borrowing.”
That’s what I’ve been hearing, too.
Peter Park is the chief financial officer for Lynnwood-based UniBank, which caters to small business owners in south Snohomish County and north King County. His bank was the among the first to receive Job Act funds to lend.
I asked him how things were going.
“Demand has been pretty slow,” he said, although he expects that to change.
He said there isn’t a big demand for loans right now because much of the bank’s business is with people who want to invest in a small business. “There are not many people selling their business,” Park said.
I also talked recently with Stephen Gordon, the chairman of Opus Bank, which just completed its purchase of Everett-based Cascade.
I asked him his take on banking these days.
“It appears to me that the industry is in a state of paralysis,” he said. “There’s a clear delineation between the healthy banks and the others.”
Gordon said that the government’s earlier loan program, the Troubled Asset Relief Program, wasn’t successful for the most part because many of the banks that received money “did not lend it out.”
“Banks are still licking their wounds to a great extent,” Gordon said. “Although there are signs (now) that banks are lending.”
“What I’m hearing is that businesses out there don’t know where to turn,” he added. “Many banks are not in a position to support their growth, so they’re not expanding. It’s a vicious circle.”
It’s also clear from the national business survey and others I’ve seen in recent months that many business owners are leery about going further into debt. Slow sales growth has drained them of the confidence they need to invest in the future.
Only 3 percent of responding businesses said financing was their biggest problem during the last federation survey. But 24 percent said weak sales was the No. 1 problem.
Some 50 percent reported making a recent capital expenditure. That sounds like a lot, but it’s a historically low average. Most of the money was spent on new equipment, not on equipment and people — like Elysian’s new brewery complex.
How do we increase that confidence so that businesses will start hiring people again instead of just buying new machines?
It looks like the only thing that will break the logjam is an increase in consumer spending, which should boost confidence and create more jobs.
But spending beyond our means is what got us in trouble in the first place.
It really is a vicious circle.
Mike Benbow: 425-339-3459; benbow@heraldnet.com.
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