As San Francisco kicks off its annual Small Business Week celebration today, the federal government reports that it backed a higher volume of local small business loans in 2006 than in 2005, potentially signaling a growth in entrepreneur confidence despite ongoing issues affecting the sector.
“The economy is doing better. The stronger the economy is, the stronger small businesses are, the more likely they are to borrow money,” said Gary Marshall, spokesman for the San Francisco district of the U.S. Small Business Administration.
The SBA traditionally backs business loans whose owners are considered marginal lending candidates by banks, allowing people with good records but lower credit scores or less collateral to obtain funding to grow their small businesses. Through its basic business-loan and real-estate-loan programs for businesses with fewer than 500 employees, the SBA backed some $779 million worth of loans in 14 Northern California counties in its 2006 fiscal year, which ended in September. That figure, which includes more than $87 million in loans to San Francisco businesses, represents a 7.5 percent dollar increase in regular business loans and a 19 percent dollar increase in loans for real estate buying.
Samovar Tea Lounge was one such recipient. Robert Sandler and his two business partners received more than $100,000 through a Greater Bay Bank loan backed by SBA. They used the money to open a second tea shop at Yerba Buena Gardens, a move Sandler said was necessary because the original Castro neighborhood location was at capacity.
“Every quarter we have is better than the last one, so we keep pushing the envelope,” Sandler said. “It definitely started out pretty slowly, but word seems to have gotten out. I think the economy is changing.”
Banks are also seeing an uptick in the number of Asian and Latino immigrant business owners coming in for loans and services, Wells Fargo Bank Director of Small Businesses Maggie Mui said. Most are seeking lines of credit to purchase equipment or vehicles, she said.
“They have a very good spirit. Many of them, they have a job, but they also start their own business. They believe you can make more money being your own boss than going to work for somebody,” she said.
The health of small business is important for the health of The City’s economy overall, according to economist Kent Sims, because it represents such a large portion of businesses in San Francisco. City Hall pegs the number of companies with zero to 20 employees at more than 95,000, while other studies indicate the figures may be higher. Small businesses represent 95 percent of all companies in San Francisco, according to release from the Small Business Commission.
While glad to receive loan funding, several entrepreneurs said they see serious obstacles to doing business in town, among them a white-hot real estate market that converts potential offices into condominiums, high taxes and high regulatory costs, including the minimum wage and the paid sick leave mandate due to be implemented in 2008. Others, including Sandler, said they see the latter as fitting with their business culture.
“San Francisco is a high-cost city to do business in,” said San Francisco entrepreneur Scott Hauge, who is also head of the nonprofit Small Business California.
Small Business Week festivities kick off tonight with “Flavors of San Francisco,” an awards ceremony that will honor several small businesses. Activities continue throughout the week. San
Francisco’s Small Business Week is held by the federal SBA and the San Francisco Small Business Commission, with sponsorships by Wells Fargo & Co. (WFC)’s Wells Fargo Bank, Microsoft Corp. (MSFT), Comcast Corp. (CMCSA) and others.