Are Utah banks lending? Depends who you ask

Are Utah banks lending? Depends who you ask
Credit crunch » Businesses say money tight; banks say it's flowing

By Paul Beebe, The Salt Lake Tribune

If anyone qualifies for a business loan, it might be Frank Dsouza.

His Salt Lake City-based import, manufacturing and distribution company, Seaich Corp., is doing just fine, notwithstanding the worst recession since the 1930s.

But four banks have turned down his request for $500,000 to expand his company further -- even as they insist they are making loans to creditworthy borrowers with good business plans.

"The banks say that they have money? I'll say give it to me. I've got a plan," Dsouza said last week.

"We've been profitable. Our business was up about 26-27 percent last year, as opposed to 2007. And I've got all the financial [evidence] to prove it to them," he said.

Dsouza, 48, is the human toll of the gummed up credit markets. He can't get a loan to expand Seaich, despite an excellent credit history with several banks in the Salt Lake valley and a sheaf of purchase orders from Wal-Mart and Sam's Club that could increase his sales almost as much in 2009.

The dearth of commercial credit is a wrenching turnabout from last year. While credit began to tighten in 2007, it didn't freeze up until mid-2008. Since then, $350 billion authorized by Congress to inject fresh capital into banks and restart lending hasn't managed to break through the logjam.

Yet banks insist they are lending. Zions Bank, which received $1.4 billion from the U.S. Treasury Department in October, said it provided $4.6 billion in credit, including $2.7 billion in new loans, during the final three months of the year.

For the year, Zions' loan volume was up 15 percent, spokesman Rob Brough said.

"We have been aggressively marketing the fact that we have money to lend, particularly to small businesses. We have been the No. 1 small-business lender in the market for 15 years and continue to provide that financing," he said.

Jill Taylor, president of KeyCorp.'s KeyBank operations in Utah, said money is flowing to borrowers. But it comes with higher interest rates that she said better reflect the risk KeyBank takes when it lends money, even to long-time clients.

"We are talking to business owners and we are really having frank conversations as to what that [risk] is. But we are very much lending," Taylor said.

According to KeyBank, commercial loans increased by 8 percent last year and loans to small businesses went up 14 percent. Taylor said those figures were higher than in the previous year.

"It's ludicrous to think we're not lending any more because it's the only way we make money," she said.

Nationally, there is evidence that lending may be starting a slow recovery.

On Tuesday, the Treasury Department said lending to businesses and consumers by the 20 largest banks that received government rescue funds rose in December, although lending was down slightly in the final three months of the year.

"Overall, loan origination and underwriting activities were weak from October to November 2008 but picked up from November through December, fueled by falling mortgage interest rates and the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program," the department said.

Among those banks are Wells Fargo, US Bancorp and KeyCorp, which received a total of $34.1 billion.

Ron Vallone, a Taylorsville home builder, said he detected a thaw when he sat down with a Zions loan officer last week.

"It turned out better than I expected," said Vallone, who had spoken to Zions three times and to three other banks before without a favorable outcome before the latest meeting.

"I told him that in about two months I'd be coming to him for [a debt consolidation] loan. He seemed to think that was possible, only because we've never been late [on payments to the bank]."

Vallone has built over 400 homes in his career. Last year he bought three building lots in Salt Lake County for about $450,000, using lines of credit at five banks. When the housing market collapsed, the value of the lots plummeted. He is trying to sell them for $90,000 apiece, but hasn't received any calls from possible buyers.

Now, at 56, Vallone is edging toward bankruptcy. He continues to make payments on the properties, but it gets harder every month because home building has dried up and his savings are nearly exhausted. He has turned to remodeling jobs, but they are becoming scarce, too.

The meeting with Zions was a rare piece of good news. Vallone said the bank is eager to see what effect the $787 billion stimulus package passed by Congress will have and may be willing to consolidate his loans.

"I was able to lay the groundwork to see if they were willing," Vallone said. "I was encouraged by that."

While some businesses may be heartened by the prospect of easier credit, others continue to see no relief ahead.

Kathy Romero, 53, who owns Creative Graphics in Murray, has been unable to persuade a bank to consolidate several credit card balances and lines of credit.

Her 14-year-old company is a screen print and embroidery business, whose clients include high schools and National Basketball Association teams. Sales were down 25 percent last year. To cope, she laid off three people last month. In August she moved to a smaller building, which saved $2,100 a month.

"Since I do have a track record of paying my bills and the minimum payments are more than if I could get a consolidation loan, it seems as though someone would give me a chance. I just have been unable to find a way," Romero said.