In a recent interview on Fox Business News’ Willis Report, Citigroup Head of Small Business Banking Raj Seshadri spoke with Gerri Willis on the company’s pledge to lend $24 billion to small businesses through 2013. It was an interesting conversation, with Ms. Seshadri explaining Citi’s commitment to helping small businesses grow in order to stimulate the economy. Unfortunately, the interview was long on generics and short on specifics, especially when Ms. Willis attempted to pin Ms. Seshadri down on exactly what Citibank was going to do to help small businesses.
As we have seen from other large banks, the definition of “small” is about as exact as was Bill Clinton’s definition of “is.”
The interview began with Ms. Willis, whose program focuses on consumer and personal finance issues, explaining that Citigroup had pledged to lend $7 billion in 2011, $8 billion in 2012 and $9 billion in 2013 to small businesses. What was never discussed was Citigroup’s definition of a “small business.” As we have seen from other large banks, the definition of “small” is about as exact as was Bill Clinton’s definition of “is.” The importance here is that businesses at the high end of “small” are often much closer to Mid-size than to what most people consider as a true “small” business. With a larger business comes more relative financial stability, which is much more attractive to large banks who are under strong scrutiny over “risky” loans. However, this does not help the real small businesses that have traditionally been the engine of economic recovery.
One thing that concerned me about the interview was Ms. Seshadri’s seeming reluctance to give any exact details and to instead speak in platitudes. When asked why Citigroup has pledged the $24 billion, she replied, “We are very committed to small businesses. They are the core of the U.S. economy.” Ms Seshadri then went on to talk about serving business owners “holistically” - whatever that might mean. Ms. Willis may have been on the money later when, in response to Ms. Seshadri’s use again of “holistically,” stated, “You probably want every piece of their business, right?”
At another point in the interview, Ms. Willis shared some statistics from a recent National Federation of Independent Businesses survey that indicated that 11% of business owners feel loans are more difficult to get and that 89.3% felt credit standards had become too stringent. When asked for her response to the criticism, Ms. Seshadri said that “might have been true a couple years ago,” and then stated that Citibank was “very actively lending today.” However, once again specifics were lacking. Saying that they “leverage all the programs out there” in order to “get to ‘yes’ to as many business owners as we can,” there was little to her reply. She also seemed to have conveniently ignored the fact that this was from a recent poll.
Near the end of the interview, Ms. Willis asks Ms. Seshadri about the business owners who are coming to Citibank and whether they seem to be in better shape. The response is surprising to me as someone who works with small business owners on a regular basis. Ms. Seshadri says that “eight out of ten business owners say that they are healthy.” I’m not certain where she is getting her numbers, but I can assure you that it is nowhere near that positive. Yes, the business owners who have survived the Recession are in better shape than those who did not, but are they “healthy”? Or are they just telling the banker they are healthy in order to improve the chance of being approved for a loan?
There was one point that Ms. Willis seemed to have hit a sensitive topic, when she asked her guest if Citibank had “relaxed” the terms of loans compared to the height of the Recession. Ms. Seshadri responded that “as a lender the term ‘relaxed’ always makes me nervous.” She then repeats her platitude about trying to get to “yes” with more businesses. I, personally, would like to have seen Ms. Willis follow this up more aggressively, but instead she soft-balled the next question, asking how business owners get to the “yes” and allowing Ms. Seshadri to turn her answer into a pitch to visit a local Citibank branch.
Overall, this interview did not break any new ground or provide business owners with any reassurances about their chance of being approved for a loan. Ms. Seshadri’s comments about trying to get to “yes” for more businesses does not ensure that it will happen. When she says that Citibank has “made if much easier and much simpler for the customer to apply,” that does not necessarily mean that approval will be easier or simpler, just the paperwork. And, as I explained in a previous post, there are requirements banks have to go through on any loan, particularly SBA backed loans. Personally, I have not seen one single Citibank loan approved to any of my clients in the last three years. Not scientific, I know, but not a rousing endorsement, either.
The fact remains that businesses need to be able to put together loan applications that thoroughly detail their strengths and minimize any weaknesses they may have. Banks have not “relaxed” their standards appreciably, and that continues to impact small businesses and their ability to expand and create jobs - the jobs the economy needs to get back on track. We do not need to return to the days of lending to anyone with a pulse, but businesses that have survived the economic meltdown need to be rewarded for that, not punished because their numbers are not good enough.
If you are looking to start 2012 off by expanding your business and would like an evaluation of your loan opportunities, please contact me. I have over 30 years of experience in the industry and have helped over 2000 businesses with more than $1 billion in funding. I can provide an honest evaluation of your situation and help you to move forward in the most efficient manner. If you are a restaurant owner looking to expand, or if you are considering purchasing an existing restaurant, please view the special video report on this site.
Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.