M&T expands microloan program for small businesses

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Baltimore Business Journal
By: Gary Haber
November 26, 2010

New strategy targets companies with less than $1M in revenue

M&T Bank is going after a segment of the market it says some of its competitors are ignoring - the very smallest of small businesses.

The Buffalo, N.Y.-based bank has rolled out a new program in Baltimore and its other markets in the mid-Atlantic and New York State aimed at businesses with under $1 million in annual sales. It offers a discount on a combination of banking services, including business checking, savings and credit-card processing.

"They're clearly an under-served segment," said Joe Durham, who heads M&T's small-business lending in Maryland. "They don't get a lot of attention because they're not the big-dollar businesses. But if you can increase your penetration, you can get to big dollars."

Small businesses have long been bread and butter customers for many community banks. Bankers like Hamilton Federal Bank CEO Robert DeAlmeida are not going to give up their customers without a fight.

"I still don't see them as a real threat," DeAlmeida said of M&T. "It could be really tough competition or they could just be blowing in the wind."

A key piece of M&T's Banking Built for Business program are no-fee lines of credit in an amount small businesses would need, between $25,000 and $250,000.

That could help early-stage companies for which getting access to capital has been a persistent problem, said Joanne Saltzberg, CEO of Women Entrepreneurs of Baltimore. The group advises women about starting their own business.

Saltzberg said banks often overlook smaller businesses when it comes to lending. That's because lending smaller amounts isn't as profitable as lending larger sums, she said. At the same time, banks are wary of lending because they are concerned about small businesses' ability to pay back a loan if they haven't successfully paid back a loan before, Saltzberg said.

"The farther you get away from that $1-million mark, the harder it is to get credit," she said.

Making it easier for small businesses to get credit sounds good to Walter Murrell, who owns Murrell Worldwide Delivery Systems, an Owings Mills trucking firm.

Murrell's company does work for clients like Marriott International Inc., Procter & Gamble Co. and AT&T Inc.
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He would like to pursue more work from those companies, but first he needs a loan so he can buy newer and bigger trucks. That would enable Murrell to hire 10 more drivers and drivers' helpers to supplement the seven employees the company now has.

"We find ourselves turning down an awful lot of work, which, if we had the resources, we wouldn't have to do," Murrell said.

"It means everything in the world to us," he added. "We don't want to stay stagnant."

Finding capital has become even tougher for small businesses than it used to be, said Kiesha Smoots, the central region director of the Maryland Small Business Development Center at the University of Baltimore.

Entrepreneurs traditionally tapped home-equity loans or used their own credit cards to start a business and keep it going, Smoots said. However, falling home prices mean that many business owners can't get a home-equity loan because they owe more than their home is worth.

Banks also slashed spending limits on credit cards for many customers, meaning they can't charge as much as they used to. As a result, many small-business owners, unable to get bank loans or lines of credit, have been forced to dip into their 401(k) and other retirement savings to keep their businesses going, Smoots said.

"They're using a lot of their own equity for the working capital they need to make it sustainable," she said.

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