Now is Great Time for Lehigh Valley Companies to Obtain Capital
By Colin McEvoy on August 29, 2016
This article, which is based on an interview with LVEDC Vice President of Finance John Kingsley, originally appeared in Lehigh Valley Business on August 29, 2016. Click here for the link to the full original story, which was written by Brian Pedersen.
From the number of lenders to low interest rates to economic development services, this is an excellent time for Greater Lehigh Valley businesses to obtain capital, according to John Kingsley.
Kingsley would know. As vice president of finance at Lehigh Valley Economic Development Corporation (LVEDC), he works with companies, mostly small businesses, to help them find financing for any number of needs.
“It’s a very, very good environment for companies to be borrowing, and it is perhaps the best I’ve seen in my career,” he said in an exclusive interview with Lehigh Valley Business.
Directing the finance department at LVEDC, Kingsley is at the forefront of the commercial lending environment and knows what businesses need to successfully navigate the many lending options.
“This area has a target on it for a lot of businesses in terms of where they see potential location and growth for obvious reasons. Where we are located, the types of economic assets we have in this area,” said Kingsley, who has more than two decades in economic development and financing. Eight of those years are at LVEDC, the nonprofit public-private partnership that drives development and business in Lehigh and Northampton counties.
“I think we are going to continue to see great recruitment opportunities,” he said.
Kingsley, interviewed in LVEDC’s Bethlehem office, also talked about lending sources, how to qualify for a business loan and what he thinks the lending environment will look like over the next six months to a year.
LVB: What’s the outlook for companies getting financing for capital? What’s the environment like for small businesses in the Lehigh Valley? Good, bad, average?
Kingsley: It is as robust as we have ever seen it. We have more than 30 different private institutions engaged in commercial lending in the Lehigh Valley, and I would suggest that they are very aggressive with credit-worthy borrowers.
We are seeing rates pretty much as low as they have ever been. The terms and conditions associated with the loans favoring borrowers, perhaps to a greater extent than they have in the past. We are seeing fixed rates as long as 10 years. This is a great commercial lending environment.
Mix that with the fact that we have such a wonderful economic development service delivery system in the Valley. You have economic development incentive financing programs that are available at everything from the local level to the state level to the federal level that are all available here.
And going even a step beyond that, we even have nonprofit organizations that are focusing on the Lehigh Valley for whatever their mission is and also provide resources.
Then you take into account there are even new programs being developed on a regular basis by a lot of these entities. It’s a very, very good environment for companies to be borrowing, and it is perhaps the best I’ve seen in my career.
LVB: How many loans do you typically work on?
Kingsley: We are at any given time at LVEDC working on somewhere between 20 and 30 different loan or grant projects. We do administer a few grants here and there for the most part for large development projects in the Valley. The majority of what we are doing is going to be considered small-business lending.
LVB: What other sources of financing are available for small businesses? What are some nontraditional sources?
Kingsley: There are so many different lending resources in the Lehigh Valley. You have on the private side, you have your commercial lending institutions, you have your credit unions and you have your loan brokers and more risk-tolerant lenders, which are a different classification.
On the economic development side and on the nonprofit side, you have everything from your traditional economic development corporations like LVEDC to your city and county departments of community and economic development organizations.
You have a number of state and federally funded business assistance organizations that provide these resources. You have nonprofit organizations that are engaged largely in community development, CDFIs – community development financial institutions – and Community Action Committee of the Lehigh Valley.
All of these organizations have different types of programs; many of them provide some form of lower interest rate financing for small businesses.
This becomes somewhat of a maze to try and work through, but that is part of why LVEDC is here. To understand where all the resources are and help these businesses navigate through, understand which ones are going to be the most beneficial.
This was why we created the Lehigh Valley Lending Network to be exact, to leverage all the lending institutions that we have in the Lehigh Valley, whether it be private, for-profit or public and nonprofit. To be able to fully understand the full landscape of the products that are out there.
Startups is an area where we are not well established. Startups are hard to finance by their very nature. You are looking for other ways to substantiate the loan [if you don’t have a history of operations].
On an average year, we are working on about 70 to 100 different companies with resources that we directly administer.
LVB: What’s the importance of a company’s credit rating when it comes to applying for a loan?
Kingsley: Smaller businesses, when you are pulling something like a credit report on a business, it’s not particularly meaningful because no one puts a lot of stock in business credit reports. …
What is important is personal credit. You are generally pulling those on anyone who has a substantial ownership in the company.
We are looking really at the explicit financial history of that company and, again, understanding the narrative around that company.
How does your business work? How does it make money? What’s your market? How do you market your product? How do you get people to come to you and use you resources or purchase your product?
It’s much different than looking at a one-dimensional report. And that goes also for looking at personal credit reports.
You can’t look at it and say, it says what it says, in many cases there’s a story around it. What happened? What were the issues that led to a substandard credit rating?
So we want to understand. What’s the individual’s inclination to pay back the loan?
You need to get into the numbers. You need to ask the questions related to the numbers.
LVB: Where’s it going over the next six months, year, and beyond in terms of Lehigh Valley small businesses obtaining financing?
Kingsley: There are a lot of things going on. There are international, we have domestic, geopolitical events that are occurring, and there are any number of things that can stop the growth we are seeing.
But I can tell you this area has a target on it for a lot of businesses in terms of where they see potential location and growth for obvious reasons. Where we are located, the types of economic assets we have in this area. I think we are going to continue to see great recruitment opportunities.
I don’t know that we’ve seen a lot of our manufacturers coming off the fence and investing a lot into expansion. I think they’ve been very cautious with that.
So there’s a day when that pent-up demand creates a lot of opportunities for us. Internationally, I think a lot of manufacturers have had to do a lot more with less.
We are seeing good job opportunities in the area; almost every company we meet with suggests they are having trouble [with the] hiring of qualified, skilled positions that they have available. …
But I don’t want to say what it’s going to look like in six months. It’s very hard to tell.
One of the big questions is, who’s the next president of the United States going to be? And what kind of policies would they be considering that might be beneficial to the economy? Or for that matter, not beneficial to the economy?
One thing we can be fairly certain of is that [interest] rates are going to stay. You might see the Fed raise again before the end of the year, but it’s going to be small ticks. It may not even have a profound impact on commercial lending rates. …
Assuming we can get through a lot of the international and domestic headwinds, which are substantial, I know there’s one thing about the United States – we are a resilient bunch.
The uncertainty of a lot of this is what keeps businesses from investing.
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