Business Credit: Downsized, But Available

VXI is a 19-year-old company in a former mill building in Rollinsford. Chief Financial Officer, Tom Manero, takes me into the long room that is VXI’s production and shipping area.

MANERO: Most of our product comes in package ready to sell from China. If someone has a particular microphone for a headset, we customize it here before it goes out.

If you’ve ever called some customer service center in the U-S or far away, the person at the other end might have been talking to you over a VXI headset.

MANERO: There’s a fair bit of call center business that were doing in places like the Philippines and India. Where ever there are people doing call centers, there are people using our products.

Across its various lines, VXI sells about 200,000 units a year. That’s good enough to employ over 50 people and turn a profit but the managers see an opportunity. Right now, all of its call center headsets come with wires. VXI wants to get into the wireless market.

MANERO: R & D not inexpensive, Somewhere between a quarter and million dollars when we’re all said and done.

To raise that money, VXI turned to Vested for Growth, a program of the nonprofit New Hampshire Community Loan Fund. Last year, about 80 companies approached Vested for Growth. This year has been different.

KEY-WALLACE: It’s up about 50% over that and in the last three months, I would say the trend line is even above that

James Key Wallace is the senior investor with the program. Key-Wallace says he thinks the increased interest in this public service project comes directly from the shrinking of two sources of capital. Standard bank lending and venture capital.

KEY-WALLACE: Entrepreneurs are getting it from both sides. While there’s not as much bank debt out there, there’s not as much equity out there. So that gap in between them has grown. So we’re seeing a lot more.

Key Wallace actually opens up a big area of debate. There’s not much question that overall commercial lending activity is down but is that due to banks getting more cautious or businesses asking for less money?

Steve Webb, Vice President for Commercial lending at TD Bank North says firms have been cutting back on everything – overhead, inventory, and they’ve been reducing their debt.

WEBB: We’re not coming up with the number of loan applications that we’ve had historically. Yould expect that. Despite our efforts, the business just hasn’t been there for us.

Numbers can be hard to come by but one barometer is loans made with a guarantee from the Small Business Administration. At TD Bank North, that number is way down – more than 50% from the same period last year.

On the other hand, some banks are making more loans, particularly the community banks.

SFX: paving crew

In Concord, a paving crew is smoothing black top for the parking lot of the newest branch of Laconia Savings Bank. Laconia has been expanding. It’s doing about 50% more SBA loans than it did last year. Lou Guevin, the head of the bank’s commercial division, says lending across the board is up.

GUEVIN: Seeing strong customers. Some issues .. not as bad as portrayed in the media

Guevin says the recession has made some loans a little riskier but in those cases, his bank has turned to the SBA to sweeten the deal. As part of the stimulus package, the SBA will offer a 90% guarantee. Guevin says, if the firm is clearly able to repay, that guarantee smoothes out the wrinkles.

David Eaton, a principal with Eaton Partners, makes his living arranging financing for a variety of business deals. Eaton says, from what he sees, a lot of people are like deer in the headlights – frozen because they can’t see what’s coming next. Whatever flexibility banks might have had before is gone. But he also notes that the variety of lenders is radically different. Two years ago, non-bank lenders like the firm CIT that’s been in the news, made a number of loans.

EATON: that source has dried up. supply for loans on the cusp is very much reduced.

Bankers say their typical business customer has seen revenues drop 10 to 30% and those firms have cut back accordingly. For those that want to borrow within those new limits, the money is there. But there’s little room to push beyond that.

For NHPR News, I’m Jon Greenberg.