Small businesses get piece of stimulus pie

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Of the billions of dollars in federal stimulus money out there, Chris Yoo is banking on the hope that a fraction will boost his dry-cleaning business.

Amid the recession and credit crunch, Yoo, who owns three Joy Cleaners dry-cleaning stores in Chesterfield and Henrico counties, recently took out two loans to buy equipment that he believes will help him retain and attract customers. Both loans were through SunTrust Banks Inc. and guaranteed by the U.S. Small Business Administration.

His most recent one, for $12,500 to buy a steam machine for clothes, is the result of the American Recovery and Reinvestment Act of 2009.

"To other business owners, I say don't give up," said Yoo, who has been in the dry-cleaning business for 15 years. "Try asking the SBA."

While much of the $787 billion federal stimulus plan will go through government agencies, with much of it aimed at infrastructure projects and other spending initiatives, there are ways for small businesses to get a piece of the pie.

Guarantees and loan assistance through the SBA is one route. The other is by contracts with federal and state governments that are funding projects through the American Recovery and Reinvestment Act.

The stimulus plan will channel about $730 million to the SBA to help businesses get through the recession.

"Most of the stimulus plan is aimed at getting small businesses access to capital," said Ronald E. Bew, district director of the SBA's Richmond office, which covers most of the state.

The credit freeze precipitated by the nation's worst financial crisis since the Great Depression is reflected in the number of SBA-backed loans that banks provided in the October to May period: down about 50 percent from the same period a year earlier.

"We see that our loan numbers are down, so we know people are not borrowing and banks are not lending as much," Bew said. "A lot of the banks have reduced their lending. They have increased their credit criteria. A lot of small businesses are saying they have not been able to get credit -- for example, having their line of credit not renewed."

According to the SBA, the stimulus plan provides several streams of money aimed at helping small businesses. The programs primarily work through banks that provide SBA-backed loans. About 120 banks in Virginia participate.

The stimulus package allows the SBA to raise its loan guarantee from current levels to as much as 90 percent for some loans. Before, the SBA could guarantee up to 85 percent on loans up to $150,000, and up to 75 percent on loans greater than $150,000.

The stimulus funding includes $375 million for temporary reductions or elimination of fees that business owners typically must pay for SBA-backed loans. Yoo's loan required no fee.

His was one of 150 the Virginia SBA approved between March 1 and May 31. All benefited from a fee waiver, higher loan guarantee or both, said Peggy FaJohn, a lender-relations specialist in the SBA's Richmond district office.

"The entrepreneur is not seeking credit like he once did," Bew said. "So to encourage them, we have eliminated our fees."

Starting tomorrow, the SBA also will start to offer assistance through a $255 million program called the America's Recovery Capital, or ARC, loan program. It will provide loans of up to $35,000 to established, viable, for-profit small businesses that need short-term help to make principal and interest payments on existing qualifying debt.

"The intention is to help [businesses] stay afloat with loans they may be defaulting on," said Michael Newbrand, group marketing director for SunTrust Banks Mid-Atlantic.

Banks can decide whether to participate or not and can pick and choose what SBA loans it offers.

"We are very positive about the [ARC] program and think it's good for the small-business owner," Newbrand said.

The loans are interest-free to the borrower and have no SBA fees associated with them.

"To encourage the bank to make these loans, the SBA is giving the bank a 100 percent guarantee in case they fail," Bew said. SBA was providing training on the program for 79 banks and lenders last week.

Caroline Nowery, director of the Women's Business Center for New Visions, New Ventures, said she has seen an uptick in interest in the ARC program from small-business owners. "From what I have seen, that could be a program that will really benefit small-business owners," she said.

New Visions, New Ventures is a Richmond-based nonprofit that works to foster small-business development and financial literacy among women.

The stimulus plan also includes $30 million to expand SBA's Microloan program. The microloans for up to $35,000 go through nonprofit organizations that help businesses get started and provide technical assistance. The average loan is about $10,000, Bew said.

Banks such as SunTrust will sit down with business owners to determine their needs and what kind of loan best suits them, Newbrand said.

Yoo's banker even came to his shop on Parham Road in Henrico to get the loan paperwork started. Many are afraid they will be turned down, but the "business owner has to be asking" for the help, Yoo said.

When it comes to getting contracts, the Virginia Department of Business Assistance is working with companies to get them registered and certified to compete for work, said Wayne Waldrop, director of the agency's business information services department.

"As that money gets translated into state and federal projects, we want to help small businesses get in line," Waldrop said.

Knowing where to look is key, he said.

State contract information can be found on the state's procurement Web site, Electronic Virginia, located at www.eva.virginia.gov. Federal contracts are listed on the Federal Business Opportunities Web site at www.FedBizOpps.gov.

Depending on the size of contract, small-business owners can vie for primary or subcontractor designations, Waldrop said.

Contact John Reid Blackwell at (804) 775-8123 or jblackell@timesdispatch.com.

Contact Emily C. Dooley at (804) 649-6016 or edooley@timesdispatch.com.