As the country continues to dig out of the recession, many small businesses are still having trouble getting back on their feet. That's in part because most banks severely tightened lending to small firms.
In Milwaukee, Wis., one entrepreneur was turned down for credit by four banks and says the experience has actually helped her become a better business person.
The heat and humidity are relentless in Jones Island, a peninsula just south of downtown Milwaukee.
The island is home to the city's main sewage treatment plant, and on sweltering summer days, that smell can hang in the thick, moist air.
But as unpleasant as that can be, Daphne Wilson feels at home there.
The 44-year-old electrical engineer started her own company, Zoe Engineering, in 1999, and she's had steady contract work at the plant ever since.
"Right now we're looking at the two existing turbines for the sewage plant, and my new project that I've worked on with a team is to replace these with five turbines that will operate off of landfill gas. So it's definitely a big, green project," she says.
Wilson's company employs two full-time engineers and a few part-time employees. In a good year, it brings in about a half million dollars.
'Not A Business Person'
And Wilson says most years were good up until late 2009. One client disputed a bill and stopped payment, two other projects were delayed and Wilson had to make cuts because she didn't think to establish a line of credit when business was good.
"Now again, I'm an engineer, not a business person," she says. "Hindsight — I should of went and got money when I had money."
Now, if this was before the recession, Wilson feels she would have been a good candidate for a conventional business loan. Her company had always done well, and she had contracts for future work.
But in 2009, after the worst of the financial crisis, banks had essentially closed their doors to small businesses. Wilson applied for three loans and a line of credit: All were denied.
Angeline Gasser with Associated Bank in Milwaukee says Wilson's company did not meet the bank's standards.
"She was having a little trouble with the backup funding, and she didn't have the credit rating that was required," Gasser says.
But Gasser wanted to keep Wilson as a banking customer, and hopefully, as a future borrower. So the bank referred Wilson to one of its partners, a nonprofit micro-lender called the Wisconsin Women's Business Initiative Corp.
The Road To Financial Health
"With Daphne's, it was not a hard sell," says Wendy Baumann, the group's president. "She had a great track record, but we could also see areas that she needed to shore up in her business."
The corporation borrows money from a variety of sources, including the federal government and faith-based groups. It loaned Wilson $50,000 and mandated ongoing financial counseling to help get a better handle on her cash flow.
Baumann says micro-lenders traditionally have served entrepreneurs who may be inexperienced and under-collateralized. But that's changing.
"The last two years, we've had the highest number of loan applications we've ever had. Many, many more sophisticated borrowers that I know otherwise would be bankable deals. But the banks have had to say no, and we're taking these deals on," Baumann says.
These days, Wilson's firm is back on the road to financial health. She meets regularly with Gasser at Associated, the bank that denied her loan application in 2009.
Gasser encouraged Wilson to open separate checking accounts for payroll and taxes, and she keeps an eye on the accounts, hoping Wilson will soon be credit worthy.
"I need to see that her accounts are stable — not such a big fluctuation in account balances, where one day she'll have $40,000 in her account, and the next day, she's got $100," Gasser says.
If there's a silver lining to the recession and the ensuing credit market, Wilson says she's becoming a better business person.
"I've had opportunities to grow, and I didn't, like you know, just let me just handle what's before me. And now I'm thinking about it," she says.