Startups struggle to find cash
By Dan Nakaso
Advertiser Staff Writer
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| With no clients and about six months left for his fledgling Isla Medical Services to stay afloat, Essam Abushara went to the Small Business Administration for help, joining legions of desperate Island entrepreneurs.
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Bank of Hawai'i said no. So did First Hawaiian. Same for City Bank.
"To get a $75,000 loan," Abushara said, "they said I need $75,000 worth of collateral. If I had $75,000 worth of collateral, I wouldn't need a loan. It doesn't make sense."
In desperation, Abushara turned to the Small Business Administration's resource center near Chinatown, unknowingly joining the legions of Hawai'i small businesses scrambling for financial help in a shrinking lending market.
Like many other small-business owners, Abushara used his own money — $80,000 — to start Isla Medical Services on South King Street in March. Now he needs more cash.
Banks provide about 98 percent of the financing for Hawai'i's small businesses, said Andy Poepoe, district director for the Small Business Administration. And as Abushara learned the hard way, the value of commercial bank loans from six of Hawai'i's top banks has dropped from $4.18 billion in 2000 to $2.97 billion in 2002.
Bank of Hawai'i's commercial lending fell from $1.7 billion in 2000 to $784 million in 2002. But bank spokesman Stafford Kiguchi said that resulted largely from an effort to reduce the bank's loan portfolio outside the state.
"We certainly didn't reduce lending in Hawai'i by $1 billion," Kiguchi said, "and it would be fair to say that this isn't necessarily reflective of a reduction in our lending business in Hawai'i."
The next-biggest bank in terms of lending, First Hawaiian, saw a decline in commercial loans from $1.79 billion in 2000 to $1.39 billion last year.
The figures for Bank of Hawai'i and First Hawaiian include all commercial lending, not just to small businesses.
Officials from First Hawaiian could not immediately explain the change yesterday, but pointed out that their bank was named the SBA's lender of the year in 2000, 2001 and 2002 for total small-business loans.
Many people in Hawai'i start small businesses with money from savings, family, friends and credit cards. Abushara and his wife, Luzviminda, used their savings for computers, software, an office lease, telephone service and copy machine account. What they don't have are any clients.
Abushara thinks he needs a quick infusion of cash to get a marketing campaign under way. "At this point," he said, "it looks like we'll run out of money in six months."
Kim Hite, a Small Business Administration loan officer, told a group of small-business owners yesterday the situation can be bleak for people looking to launch a company. "Banks will say, 'You're a startup, you have no track record,' " Hite said. "Well, duh."
A task force that includes representatives of the SBA and Department of Business, Economic Development and Tourism has been talking to bankers about the importance of lending to Hawai'i's small-business climate, Poepoe said.
"Until you move the banks," he said, "you can't make that big of an impact on the economy."
Na'ama Rie, owner of Na'ama Tropical Creations of Hawaii, started her fashion business out of her Kane'ohe home in May using $5,000 in savings. This week, she went to First Hawaiian looking for a $15,000 loan to expand.
The loan officer at First Hawaiian didn't exactly turn Rie down. Instead, she was directed to the SBA resource center to get help with such things as writing a business plan.
"They told me to get help filling out all of the paper, and then come back to them," Rie said. "I guess we'll see."
Reach Dan Nakaso at dnakaso@ honoluluadvertiser.com or 525-8085.
