COLUMBIA — More than 900 banks in the U.S. applied. Most of their applications were rejected. But Columbia's Landmark Bank's application was approved, and this August the bank received $20 million from the Federal Government’s Small Business Lending Fund.
The money from the fund is not free. As set out in federal legislation, its interest rate varies, growing or shrinking depending on the number of small business loans a bank completes.
The more small business loans Landmark gives in the next couple of years, the lower its interest rate with the lending fund program will be.
With increased capital to fuel Columbia's economy, Landmark faces the question of whether Columbia businesses will want to borrow.
Landmark's president, Andrew Beverley, suggested that his bank will find lending opportunities:
"Our goal is to make every good loan that we can over the next few years," he said. "We don't feel like we are taking any unusual risks at all — I hope that other banks join with us in trying to make the community stronger."
Mike Crist, executive director of Columbia’s Enterprise Development Corporation, works with a lot of entrepreneurs. Crist said without confidence in the economy, small businesses owners won’t approach banks for new loans.
“Banks are eagerly looking to lend … anything that looks like it's half-breathing, they’re going to take half-seriously. But you can’t make demand (for loans)," he said. "It's about confidence."
Right now, many small business owners are not confident about their position in the economy.
In a 2011 survey by the National Small Business Association, 40 percent of the association's members said they see no opportunities for growth; 58 percent said they foresee a flat economy; and 72 percent said they do not expect to hire anyone next year.
This outlook appears in Columbia’s lending market as well, explained Chris Rosskopf, Assistant Vice President for Commercial Banking at Boone County National Bank.
“I don’t see anything out there to think there is a reason to expect (demand for small business loans) to pick up,” Rosskopf said.
He said most of the business owners the bank has talked to are hesitant to take on more debt.
"They don’t want to put themselves in a situation where they increase the risk to themselves," he said.
Taking what amounts to a $20 million loan from the federal government, Landmark is nevertheless preparing to meet new demand for capital in the small business community.
Landmark's confidence about growing demand is not singular. In the last nine months, senior loan officers across the country reported a rise in demand for C&I small firm loans.
The National Small Business Association also said that many of its members still cannot receive adequate financing and that this barrier is preventing them from growing their businesses.
And Corey Rimmel, the owner of Hot Box Cookies, a small business directly across the street from Landmark Bank, said he could use another loan to purchase new equipment.
With mixed signals coming from the small business community, Landmark is speaking with its money. By increasing its reserves with millions from the government, Crist said, Landmark is looking ahead, saying the community can’t be in the tank forever.