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VOL. 38 | NO. 5 | Friday, January 31, 2014

Lending on upswing for Middle Tennessee's small businesses

By Joe Morris

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On March 7, the Nashville Ledger will publish a special emphasis issue looking at start-up businesses in Nashville and Middle Tennessee. We’d love to hear how you succeeded or failed in trying to launch your business and what lessons you learned that helped or might help you in your next venture. Call Planning Editor Cindy Smith at 615-254-5522 or email her at and share your tale of triumph.

Local banks and the U.S. Small Business Administration can both cite statistics showing small-business lending is growing throughout Middle Tennessee.

But in a post-recession economy, there are still plenty of hurdles for startups and entrepreneurs looking for a fresh injection of capital.

At the end of 2013, Pinnacle Financial Partners laid claim to the top spot for small-business lending in a nine-county area, according to Sept. 30 call report data from the FDIC. The bank had notched 5,031 small business loans totaling $681 million to date, statistics show, even as it more closely evaluates business niches and plans for investment.


“When it all blew apart in 2008, it was hard to tell where the wisest place was to invest money,” says Chip Higgins, senior vice president and business banking team leader, who oversees Pinnacle’s small business advisors.

“People are getting more definite about their plans now, and everything has become more clear. There’s a very active market for expansion-type opportunities, and a hearty appetite on the lending side for good opportunities.”

Thanks to the various business incubation programs at area colleges and universities, as well as quasi-governmental bodies like the Nashville Technology Council and Nashville Healthcare Council, Middle Tennessee’s entrepreneurial climate is solid, Higgins continues.

Add in growing entities such as the Nashville Entrepreneurial Center, and it’s easy to make a case for the region’s continued small business growth.

“We have the environment, and there’s a growing lending market here,” Higgins says.

“I’d say we’re one of the more vibrant lending markets in the state,” he adds. “At one point we had more than 60 banks in Nashville, so there’s a lot of opportunity. Capital is being deployed in lot of different ways, from venture capital in the healthcare space to other types of startups and new companies being funded, so there’s a lot of positive movement compared to other markets around the country.”

Still, he adds, “there’s not enough loan supply or volume to go around to meet all the demand, particularly in startups. We got ahead of ourselves in 2005 through 2007, thinking nothing could go wrong, and learned a lot of lessons in 2008 through 2011. We’re still lending to them, but we’re being fairly conservative for those types of loans.”

The obstacles here are similar to those throughout the country, Higgins says, because of what the general perception of a small business is.

“People think they’re supposed to figure out a way to have their own business, but it’s very hard to build a plan, document what you’re going to do in an actionable way,” he says.

“Someone sees what they view as an unmet need, or an opportunity, but they need to flesh out a business model that will support the money they are asking for. We try to work with people when they come in, because often they have not put any thought into it beyond the product or service itself.”

Also, he says, existing business owners sometimes fall short on refinancing efforts because they don’t have enough equity to support additional funding.

“It’s hard to do 100 percent of financing for new or existing businesses,” Higgins says. “They’re always better off if they have some equity, plus enough working capital to float them through startup.”

Walter N. Perry III, district director of the U.S. SBA’s Tennessee District Office, echoes that message.

The agency works to support small businesses looking to start up and expand through counseling and training, as well as loan guarantees through SBA-guaranteed loans. It also connects entrepreneurs with federal contracting opportunities.

Like Higgins, Perry says Middle Tennessee lending is on the upswing, particularly compared to the rest of the state. In fiscal 2013, which ended Sept. 30, 2013, there were 435 SBA loans statewide for $247 million. That’s an increase of 9 percent across the state, Perry says, and Middle Tennessee continues to show the bulk of the growth.

“During the first quarter of fiscal 2014, from October through the end of last December, Williamson and Davidson counties had a third of the 80 loans, worth $40 million, that were made statewide,” he says. “Montgomery County also was strong, which shows that there are opportunities for new and exiting small businesses to attain working capital through SBA lenders.”

While banks have working capital to lend out, Perry is quick to add, they want to see well-thought-out business plans, as well as personal assets of at least 10 percent to 20 percent, in some cases, before they’ll hand over any cash.

That’s especially true for new startups, which received about one-third of funds in Tennessee last year.

“Banks have always wanted qualified borrowers, so that’s not new,” Perry says. “Now they really want assurance that you know how your good or service is going to compete in the marketplace.”

To further startup success, the SBA district office works with a variety of groups, including SCORE [Tennessee State Collaborative on Reforming Education] and the state’s small business development centers, to help borrowers with everything from the basics of writing a business plan to formalizing case statements for additional funding to procure new equipment, add to staff and more.

“Preparation is the key,” Perry says. “Utilize those development centers, where you can get free counseling and training on getting ready to go to the bank, and how to approach bankers. There are always going to be obstacles when you’re looking at financing, but with good prep work you’re ready to deal with them.

“If you have a great idea and nothing else, you’re not going to come away with financing, but if you use the resources available, you will be in better shape.

“At the end of the day, those banks want to see businesses successfully offering their goods and services, and repaying those loans.”

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