June 10, 2010
Washington Report: Updates From the Capitol
CEO: Banks Need to Lend ‘Outside the Box’
As Carolyn Walker, president and CEO of the Maryland-based TDP L.L.C., listened to banking regulators opine Wednesday morning at a Senate small business roundtable discussion on identifying obstacles and exploring solutions in small business lending, an unsettling notion came to mind: They simply don’t get it.
TDP provides training, development, and program management primarily to government clients, including the U.S. Census Bureau, for which it is managing a multi-million dollar contract to train employees at Census data capture centers in Baltimore and Phoenix. The bureau liked TDP’s work so much, it soon increased the contract from $2.1 million to more than $3 million. But to begin the contract, Walker needed to hire additional staff, and despite her strong credit history, loan requests were denied. She was forced to put together what she described as “hybrid financingâ€ from various sources.
Most lenders, Walker laments, are wary of extending credit to firms that don’t have hard assets that can be used as collateral, and those that specialize in receivables financing take advantage of small businesses.
“Moving forward this country’s success is going to be in the space of technology and service providers. That’s where the innovation is, where the growth is, and where the opportunities are–not only in the U.S. but globally,â€ Walker said. Bankers and regulators don’t seem to understand how service-based companies operate or how to properly assess their viability or profitability.
Sen. Mary Landrieu (D-Louisiana), who chairs the small business panel, agrees with Walker and says banks should figure it out quickly. A paradigm shift is taking place in the business world and if banks can’t figure out how to lend on firms like TDP that are based on brainpower and technology, “We’ll never get out of this box,â€ she said.