By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published Dec. 9, 2009

Several lenders gave Charleston-area business representatives a glimpse Wednesday into what they consider when making loans, offering insight on how to get financing in a tough lending climate.

Brian Kornahrens, assistant vice president for commercial banking with Carolina First, said his bank is still lending money but it now faces more scrutiny in how it operates.

Kornahrens said banking has returned to its fundamentals, which he defined as building relationships with clients and acting as a trusted adviser.

“We are not a loan factory,” Kornahrens said at a meeting of the Charleston Metro Chamber of Commerce Area Business Council.

He said Carolina First looks primarily for solid cash flow when businesses come in seeking loans.

“We don’t really want your collateral,” Kornahrens said. “We don’t want to have to liquidate it.”

Ed Kesser of BCI Lending, a non-bank lender based in Columbia, said most lenders look at the same types of factors: equity, cash flow, management experience, a secondary source of repayment and collateral.

Lenders want to see that a borrower has equity, or “skin in the game,” Kesser said. They want to see who really owns the company — the borrower or creditors.

Kesser said BCI Lending looks at how well cash flow will cover a business’s debt service. The company focuses on historic cash flow, not what’s projected in a business or expansion plan. Those plans are often optimistic, he said.

“I’ve never seen a set of projections that said I couldn’t service the loans,” Kesser said.

Lenders want to see that the people running a business have relevant management experience, he said. They consider collateral and whether the business owners have “personal liquidity,” or a source of money to repay the loan if the business has unexpected challenges.

“We know everything is not going to be what it’s projected to be,” Kesser said.

Tom Lauria, area manager of the Charleston Small Business Development Center, said he and his staff can help with the development of business plans and can help businesses understand the resources available through the U.S. Small Business Administration. The center doesn’t make loans but can direct businesses to lenders that are a good match for their needs.

“We can help you put your package together so when it gets to them (lenders), it can go faster,” he said.

Lauria said he has noticed that startups in the retail, restaurant, hospitality and trucking industries have had a tough time finding financing lately. New businesses in general have more to prove to land a loan, he said.

But other lenders at the meeting said there are exceptions.

Gregg White, program director for the U.S. Department of Agriculture’s Rural Development business and cooperative programs in South Carolina, said he just made a loan for a new hotel.

White said USDA Rural Development makes low-interest business loans and guarantees bank loans. Though the name implies a focus on only rural areas, White said businesses located near metro areas can qualify.

Kornahrens said he recently closed a loan for a restaurant.

“It really goes back to knowing the business and knowing the individuals who operate the business,” he said.

Cindi Rourk, director of the Charleston Local Development Corp., said she is about to close a loan for a trucking business.

Rourk said the Charleston Local Development Corp. is a lender of last resort, making loans to businesses that are turned away from commercial banks. Her organization, created by the city of Charleston, lends up to $85,000 but also can work with banks to put together larger deals.

Lauria encouraged businesses to ask federal lawmakers to support the extension of special U.S. Small Business Administration programs that are set to expire at the end of 2009. Those programs, passed in this year’s federal stimulus act, include government guarantees of 90% of loans, in some cases, and the elimination of loan fees.

“If they take the guarantees away, it will be more difficult for small businesses in 2010,” Lauria said.

Reach Ashley Fletcher Frampton at 843-849-3129.