Small-business loans still flowing

Many in Mass. find no barrier

Londy Rodas assembled packages at Duplication Management Inc. of Woburn, which is on pace for its best year ever and has been encouraged by Enterprise Bank to borrow for expansion. (Yoon S. Byun/Globe Staff)

Even as consumer loans become harder to get, many small businesses in Massachusetts report they are still able to borrow money.

In Franklin, Stephen Dunn, president of design and manufacturing firm Core Concepts Inc., says Benjamin Franklin Bank has invited him to renew his $1 million line of credit. In Woburn, Mike Jenoski, president of Duplication Management Inc., a printing and Web services company, says Enterprise Bank is encouraging him to borrow to expand his business. And in Jamaica Plain, Katherine Mainzer, co-owner of Bella Luna Restaurant and the Milky Way Lounge, says she is about to close on a $360,000 loan from Citizens Bank to relocate.

While Mainzer, like other small business owners, is worried about the slumping economy, "We didn't see a clampdown" in lending, she said.

In fact, Massachusetts trade groups and bank executives report a continued flow of borrowing by small businesses, despite the credit crisis that has slowed other lending such as consumer auto loans and mortgages.

Among the 18 publicly traded banks in Massachusetts that have reported their earnings through Sept. 30, 12 said the total value of their loans increased 5.9 percent or more this year, compared with just five banks at the same point a year ago, according to a preliminary analysis by Milton bank analyst Suzanne Moot.

Five reported loan growth above 10 percent, including Danvers Bancorp at 13.3 percent and Enterprise Bank of Lowell at 11.9 percent. Much of the growth is the result of lending to small businesses, executives say.

Moot said it's difficult to draw broader conclusions about local lending until the Federal Deposit Insurance Corp. reports more specific figures for the state next week. Some business borrowers and lenders concede that loan terms have tightened, with banks raising interest rates or demanding more collateral.

Still, the reports filed by the publicly traded banks provide a counterpoint to the national concern that businesses can't borrow because banks are hoarding their cash, Moot said. "All the data we've got doesn't point to a slowdown in lending," she said.

Nationally, some economists have made similar points. In a paper last month for the Minneapolis Federal Reserve, three economists said bank credit continued to rise, at least through Oct. 15, as have the total amounts of loans and leases.

But Harvard Business School professors Victoria Ivashina and David Scharfstein said in their own paper that loan totals are growing partly because companies are drawing down previously arranged lines of credit. Also, several economists at the Federal Reserve Bank of Boston wrote this month that the amount of loans banks keep on their balance sheets is growing because they can no longer sell loans to be packaged into other securities.

Still, local business executives aren't complaining they can't get credit, or even that bank terms are too tight, said Brian Gilmore, executive vice president of Associated Industries of Massachusetts, a trade group representing 7,000 companies in Massachusetts.

"The whole psychology is that the sky is falling, even though it's not," Gilmore said.

Executives at Boston accounting and consulting firm Vitale, Caturano & Co. say the biggest impact of the financial crisis on lending so far is that banks are inspecting company books more closely before agreeing to make loans. "You feel like at least so far we're ducking a lot of the national issues," said Jeff Korzenik, Vitale Caturano's chief investment officer.

Some economists and bankers say smaller banks are picking up customers who aren't top priorities for big banks, which are grappling with subprime mortgages and other problems in their loan portfolios.

"All of us are benefiting" from bigger banks' challenges, said Kevin T. Bottomley, chief executive of Danvers Bancorp. Bottomley still expects the national economy's slowdown to affect Massachusetts companies and called demand for loans "moderate at best" as businesses grow increasingly cautious about their prospects.

At Enterprise Bank in Lowell, chief executive Jack Clancy said his borrowers' situations tend to be simpler than those of companies who borrow from larger banks, so it's easier to review their books and judge their loan applications. "We pretty much know all our customers," he said.

Like other bankers, Clancy anticipates a national recession, but he still expects his bank's total lending to grow through next year, driven by business sectors that should hold up, including medical devices and defense. A typical business loan at Enterprise ranges from $1 million to $10 million.

Jenoski, president of Duplication Management, the company he founded in 1988, is an Enterprise customer. His company has annual sales of about $10 million and through last month was on pace for its best year ever.

"In the media, everything you pick up is negative, but on the flip side, we're involved in some projects that are making November pretty decent for us," he said.

Jenoski said he worked hard to diversify his business after it was battered by the economic downturn that began in 2001, when his customers were primarily technology firms. Today, clients include Harvard University, the Market Basket supermarket chain, and Fidelity Investments. He even spoke with Enterprise Bank executives recently about the possibility of borrowing money to buy other companies.

"That would be something they would want to work with us on," Jenoski said.

Ross Kerber can be reached at kerber@globe.com.