WisBusiness: Small-business owners tell oversight panel credit still tight despite TARP program

By David Wise


MILWAUKEE — Small-business owners expressed frustration today at their inability to access credit despite the government’s injection of more than $500 billion into banks so far under the $700 billion TARP program.

Representatives from local Wisconsin banks at a Congressional Oversight Panel hearing in Milwaukee noted, however, that they have voluntarily accepted TARP funds and continue to lend.

The panel is charged overseeing the Troubled Asset Repurchase Program program and was in Milwaukee to asses its impact on small business lending. Listening to testimony today was Chair Elizabeth Warren, a Harvard Law professor, and Vice-chair Damon Silvers, general counsel of the AFL-CIO.

Wayne Perrins, general manager of Badger Trailer and Equipment Corp., said the company’s bank has demanded a roughly $2 million payment, threatening to call its loans if the business does not come through, even though Badger has not missed any payments and is improving its operations. Perrins said Badger’s lender will not renew its loans, and without access to operating capital, Perrins said the company is in danger of going out of business.

“We have worked very hard and have initiated 20 to 30 years of needed improvements to our business practices in just two years,” Perrins said. “We are finally poised to succeed as we move forward into the future. However, we need a willing financial institution as our partner.”

Tom Klink, president of Jefferson Electric, discussed his company’s woes in trying to secure loans for an expansion. The company initially received a positive response to a loan request in August 2008, but was denied in September, Klink said, because collateral for the loan would be a plant in Mexico, and because of the nation’s dismal economic outlook and concerns about the company’s debt load.

Klink said the company is still seeking financing and that TARP has afforded “little or no relief.”

David Griffith, owner and CEO of Cross Town Machining, expressed frustration that banks will not lend needed operating capital to his company. Griffith said the company is seeking Small Business Administration loans, which would be guaranteed at 90 percent, yet is still unable to access credit as banks must first be willing to approve the loan.

Still, some bank officials who testified at the hearing painted a different picture, saying they have upped their lending since receiving TARP funds.

Peter Prickett, president and CEO of First National Bank-Fox Valley, which has received $4.3 million in TARP funds, said it has increased lending, and already leveraged the money it received nearly three times over. Since Oct. 1, the bank has increased lending by $20 million, has renewed $21 million in credit lines and purchased several million in municipal bonds, he said.

Prickett said his bank did not need the government funds, but borrowed them in order to boost lending.

Robert Atwell, chairman and CEO of Nicolet National Bank, said his company accepted $15 million in TARP funds, but did so because it believed in its “social purpose” and to increase opportunities for shareholders. He said the bank is still lending and accepting new customers.

“We were and are very well capitalized,” Atwell said. “We did not ask for, nor did we need, a bailout.”

Atwell expressed disappointment in the way the program has been characterized and how the government has moved to limit compensation for companies accepting TARP funds, even those that did not need a bailout. He called for regulation and policies aimed at decentralizing lending and making it more of a personal business to avoid future banking problems.