Slowly, business borrowers return to banks

More business owners in northern Nevada are beginning to talk with their bankers about loans to finance expanded operations.

The increase in loan demand in recent weeks hasn't been dramatic, and bankers say they still don't know how many of the would-be borrowers ultimately will qualify for loans.

Even so, an increase in applications is a sign that business owners are beginning to stir.

Nevada State Bank, for instance, received 39 applications for $6.1 million in small business loans at its offices throughout northern Nevada in January and February.

That compares with 128 applications that sought $19 million in business loans for all of 2009, says Kevin Sullivan, an executive vice president with Nevada State Bank in Reno.

"Two months doesn't make a trend, but we are seeing a higher volume of loan requests," Sullivan says.

Some of the loans would be used to finance equipment purchases, he says, as business owners feel that the economy has stabilized enough that they can forecast demand for their products.

In other instances, Sullivan says companies that limped through the darkest days of the recession with older equipment now are forced to finance replacements.

At First Independent Bank of Nevada, President Jim DeVolld says some potential borrowers are warily edging back into the market.

"A lot of people have been sitting on their hands for two years," he says.

Loan officers at First Independent say their pipelines of potential deals have been filling rapidly in recent weeks, a trend that DeVolld calls "intriguing and exciting." Among the potential borrowers, he says, are healthcare companies that want to buy medical equipment as well as borrowers in a wide range of industries who are looking to expand their working capital.

Rob Humphreys, market president in Reno for U.S. Bank, says his institution is cautious about loans to provide working capital.

The bank has seen an uptick in loan requests in recent weeks, he says, but some borrowers are looking to the bank to help fund the losses they've suffered in the past couple of years.

"That's not what banks do," Humphreys says.

U.S. Bank also has seen a steady flow of loan requests from the very smallest of entrepreneurs people who have lost jobs and have decided to strike out their own with a new business.

Nevada Security Bank, which has spent much of the winter steadily shrinking its loan portfolio, hasn't been actively pursuing new business loans, says Ken Achurra, a senior vice president and chief credit administrator at the bank.

Even so, he says the bank has seen a modest increase in loan applications from its existing companies as well as potential borrowers who seek out Nevada Security on their own.

Some of the borrowers, he says, hope to take advantage of a depressed market for commercial real estate to finance the purchase of an office or industrial properties.

That trend is apparent, too, at Nevada State Development Corp., which specializes in Small Business Administration loans to finance purchases of real estate and capital equipment.

"We're having a lot of meetings with prospective borrowers," says Adrien Burney, a senior vice president and loan officer in its Reno office.

In some instances, Burney says, potential borrowers appear to be getting their ducks in a row to launch building projects that would provide some relief to the hard-pressed construction industry.

And the potential borrowers appear to be well-qualified.

"We haven't seen a weak borrower in quite a while," Burney says.

The Small Business Administration, which works with banks and other lenders to guarantee some loans to small businesses, hasn't yet registered an uptick in activity in northern Nevada.

David Leonard, senior area manager with the agency in northern Nevada, says recent activity remained stuck at last year's levels and those were the lowest since 1942.