SBA sees growth potential on B.I.
When Jennifer Brady-Brown and Sara Sprague approached The Washington Trust Co. in March with an idea to start a women’s boutique on Block Island, bankers told them securing a loan would be difficult. The business would be a startup during a downtrodden economy and located on an island where the retail season lasts just 10 weeks.
The two friends stayed up until the wee hours of the morning creating a business plan and then, in a critical turning point, the U.S. Small Business Administration agreed to guarantee a portion of the loan in case of default. Washington Trust approved the $40,000 loan and Wild Flowers Boutique opened May 22.
“We did the research, and we knew what we needed to do,” Brady-Brown said.
The SBA has stepped up promoting itself on the island in recent years, seeking people like Brady-Brown and Sprague who need help persuading a bank to approve a loan. In 2009, the SBA guaranteed a portion of one loan totaling $75,000. So far this year, the SBA has guaranteed three loans totaling $61,000.
Still, that’s behind 2008, when the SBA supported two loans totaling $575,000 and 2007, when the SBA guaranteed four loans totaling $124,800.
This year, Rhode Island District Director Mark Hayward visited Block Island with a group of about 35 state and federal officials and representatives from a half-dozen banks on June 23. It was the 16th such annual trip by the SBA.
The contingent arrived just as businesses were preparing for the height of the summer tourist season.
“They may be closed nine months of the year, but they’re an integral part of our economy,” Hayward said.
Virtually all businesses on this 10-square-mile island close during the winter, when the main commercial area appears like something akin to a deserted movie set. With no cash flow for most of the year, island business owners spend time explaining to loan officers how they will pay their debts. It doesn’t help matters that banks typically view hospitality as one of the riskiest industries to lend to because of the volatile nature of consumer spending. Enter the SBA.
“[The SBA guarantee] provides an extra layer of support, which out here is important for either startups or because the business might not have the collateral,” said Barbara MacMullan, a vice president at Washington Trust and the manager of the island branch.
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