🔒Corporate America pitches financing for small businesses

When an email from Sam's Club popped up in René Damen's inbox about a year ago, his Maplewood Inn and Motel in Casco was coming off a slow year. "I just needed some money to go through the winter and pay off some credit cards," Damen says. He didn't need much, but he needed it quickly.

The email introduced a new small business lending program that Sam's Club was promoting to its members, marketing loans of up to $25,000 backed by the Small Business Administration. Funded and serviced by Superior Financial Group, a California SBA lender, the loans resulted from a survey conducted by the bulk retailer of its small business customers. One-third of the respondents said they had skipped purchases at Sam's because of budget constraints. That prompted the company to find a way to bolster its members' spending.

Damen, with fresh memories of long, difficult negotiations for bank loans, was intrigued by the email. After 12 years of successfully operating the six-room motel and five-room B&B, he'd approached a bank to refinance Maplewood's debt following a year or two of lagging business. It didn't go well. "At the end they said no. They said, 'Why don't you just sell the place? You have no future there,' " Damen says, still clearly smarting from the experience.

Aside from that difficult history, Damen needed financing right away to get through the next two months. Sam's Club's offer came at just the right time. "Because the SBA was connected to it, I thought it might be a good thing," he says.

Damen responded to the email and immediately received a message and phone call from Superior Financial. Three weeks later, after sending in his paperwork, he had a $7,500 loan carrying an interest rate of about 7.5%. "[Sam's Club] says they want to help small businesses, because those are [a majority] of their customers. I think they came through," Damen says. "We just had the best summer ever."

The Sam's Club partnership has so far resulted in four loans totaling $40,000 to Maine businesses, through the SBA's express lending programs. A total of 983 loans have been made nationally through the partnership, totaling $11.3 million, according to Superior Financial Group spokeswoman Tamara deClercq. Superior Financial intends to roll out the lending program through 600 Sam's Club stores early next year, she says.

The idea of Walmart-owned Sam's Club rallying to aid the same small, independent companies the conglomerate is often accused of driving out of business may seem ironic. But the warehouse club isn't the only non-bank corporation dabbling in small business financing. Office Depot has launched a similar program, marketing SBA loans through Superior Financial, while Starbucks has seeded a $5 million loan fund geared toward small businesses. The programs are just beginning to make inroads in Maine.

If you've stopped for a latte at your local Starbucks lately, you may have noticed red, white and blue bracelets available for $5 donations at the counter. Similarly patriotic pamphlets explain the bracelets' role in Starbucks' "Create Jobs for USA" program, the coffee giant's attempt to put a dent in the nation's unemployment rate of 9% heading into November. Add your $5 to the cause, the literature explains, and Starbucks will funnel every last penny of it to the Opportunity Finance Network, an association of 180 community development financial institutions. CDFIs — financing organizations dedicated to serving low-income and underserved markets — use the money to fund loans to businesses committed to creating and sustaining jobs.

Here in Maine, the CDFI administering the program is Coastal Enterprises Inc., which learned in early November that it would receive $173,500. CEI works with a variety of organizations to further its mission. Create Jobs for USA marks a first-of-its-kind offering for the nonprofit, according to Grace Cleaves, director of marketing and communications for CEI. "This is really new," she says. "We've certainly worked with banks before who have partnered with us … but this corporate [program] is very new for us. We haven't had this opportunity before."

Although the retail-related financing programs haven't gained the attention of the Maine Small Business Development Corp., the statewide network of small business counselors and resources, State Director Mark Delisle says any new option to help finance small business is worth consideration.

"Certainly, when the credit markets froze at the end of 2008 and throughout 2009 and parts of 2010, lending was restricted," he says. "That's still the case to some degree. Financial markets are more conservative. They haven't changed the criteria so much as they're enforcing things more stringently … there's less flexibility around things like credit scores. And a lot of the collateral behind loans has devalued through property value declines, so it remains a challenge to find financing."

Delisle said small businesses have a range of options for financing, from the traditional bank loan to pay-day loans, with accompanying degrees of risk. He says he'll keep an eye out for corporate lending programs in Maine, such as those offered by retailers, but in general he encourages small business owners to consult with an SBDC counselor to assess financing options.

While Sam's Club and Office Depot are simply marketing the availability of loans through a third party, Starbucks has seeded its small business loan fund with $5 million. By inviting its coffee-drinking customers to participate, it's taking a much more consumer-facing approach. "It's really exciting to have the consumer involved in the storefronts, to have a hand in job creation," Cleaves says.

Starbucks says it hopes to aid in the economic recovery by increasing the purchasing power of middle-class consumers. "We hope this is a galvanizing moment as Americans come together to be catalysts for change by giving community businesses access to the credit they need to hire, to grow and to contribute to creating thriving communities," CEO Howard Schultz said in a November press release.

On average, CDFIs will match $30 from other sources for every $5 contribution, producing $35 for loans for each donation, the release states. One new job will be created or retained for roughly every $21,000 in loans, the company estimates, based on forecasting models developed by Opportunity Finance Network with input from independent economists.

Those jobs are essential to the program, and what delineates the Starbucks initiative from the many other small business lending programs offered by CEI, says Cleaves.

"Our focus at CEI has been on lending that creates jobs, or benefits the environment, or delivering economic equity to a community or improving individual economic circumstances," says Cleaves. "This [program] has to have the jobs part for us to consider it eligible."

CEI is not limiting the amount of the awards, and Cleaves says she expects five to 10 loans will be made. Applications were being reviewed as this issue of Mainebiz went to press. The loans are appropriate for commercial activities that create or preserve jobs in low-income or disadvantaged communities and are open to small businesses, nonprofits, microenterprises, housing developers and commercial real estate developers, says Cleaves.