The Intersect Group Featured in The Atlanta Journal-Constitution
Line of Credit Boosts Business' Flexibility
Action Gives Companies the Option to Expand, Hire New Employees
April 15, 2011, News Section, Main Edition, Page A23, J.Scott Trubey/Staff
ATLANTA (Apr 15, 2011)-Wade Hughes' fast growing consulting company recently got a big increase in its working line of credit, a flow of cash that can help his firm hire and take on new projects. Satya Tiwari, president of a wholesale distributor of home furnishing products, got the credit he needed to buy a second warehouse for his inventory, and cash to rent out a third. They are among small- to mid-size business owners who, according to some anecdotal evidence and survey data, are more bullish on improved sales -- and finding the credit they need to capitalize.
Though there's little hard data, "a variety of recent survey results paints a picture of increasing optimism about future sales and business conditions and a corresponding easing of credit availability for small businesses," Federal Reserve Governor Elizabeth Duke said Thursday in a speech in Washington.
The small business engine of the U.S. economy needs credit to help it run like a well-oiled machine.
Credit became tough to get after the 2008 financial nosedive. Lenders contend slumping demand was a bigger problem as firms looked to rid themselves of debt and ride out the storm. Indicators remain mixed on both the supply and demand front for credit, however.
The National Federation of Independent Business said this week that optimism fell slightly in March despite more hiring. And 93 percent of respondents said their credit needs were met or they weren't interested in borrowing more. "Lack of demand-- and not the availability of credit -- appears to be the stalemate that is holding back loan growth," the NFIB report said.
Chase, the retail banking arm of New York giant JPMorgan Chase, entered the Georgia market after it acquired the failed Washington Mutual in 2008, had little business banking here to speak of. Its lending to Georgia companies under $20 million in annual revenue grew 60 percent to $69 million in 2010. Some of the growth is from companies seeking new lending relationships because of a failure or displeasure with another bank. Brandon Long, Georgia market manager for business banking with Chase, said prospective client sales are up, and credit worthiness also is improved. "There's a larger demand for credit. That's driven I think because things are improving overall," he said.
Hughes, managing partner of The Intersect Group, a provider of IT and financial consulting and staffing services to nearly 400 companies, said his firm had $27 million in revenue last year. That is expected to grow 40 percent this year. Clients are investing in infrastructure, or engaging in complex financial transactions that were delayed during the recession. Hughes' firm increased its credit line 50 percent, partly to help pay Intersect's consultants' wages until clients pay his firm. "There is a lot more [credit] availability if you have the track record to prove it," he said.
Tiwari, whose furnishing company, Surya, grew last fiscal year to $38 million in revenue on a double digit boost in sales, said his firm added two lines of credit recently to expand its inventory space. Tiwari's firm distributes home furnishings like rugs and wall art through regional and national retailers like Haverty's and Crate and Barrel. Lenders haven't rewritten their rules, he said, "the banks are just enforcing them vigorously." But some companies say they're still having trouble finding credit, even as sales increase.
Holly Monaghan, who runs Dunwoody staffing firm The Waters Organization, said 300 percent revenue growth in two years hasn't convinced her lender, a national bank, to offer a revolving credit line. The company wasn't profitable when Monaghan and her partners bought a majority stake in 2009, though it is now. They hit $1.8 million in revenue last year, up from around $400,000 in 2008. Waters recently won a five-year contract to provide clerical staff to a metro county and had to seek out alternatives to banks last year when hers turned her down. Waters pays its employees weekly, but the county pays the firm every 30 days. Monaghan said she prefers a national bank for the convenience of employees but might go with a smaller institution. "We need that line of credit to grow," she said.
Copyright 2011 The Atlanta Journal-Constitution
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