We hear all the time that small businesses are having trouble accessing credit. But sometimes it’s hard to picture what that means both for an individual firm, and for the wider economy. To find out more, WNPR’s Harriet Jones visited a construction company that’s currently rehabbing several old homes in Middletown.
Jason Nobles, one half of AK Enterprises, is showing me round an old house in Ferry Street, right in the center of Middletown. This is the last of several buildings that AK Enterprises has worked on in this neighborhood, framing them out so the formerly derelict properties can be redeveloped into new housing.
“This is going to be a two-family condo right here – of course that’s going to be a three family. That is probably one of the oldest buildings in Connecticut. It was gone when we got here, it was really, really poor shape. The entire neighborhood, these three roads, they look completely different, and yeah, it makes me feel good – I hope Middletown likes what we’ve done for them.”
A happy ending, but the story of how AK Enterprises was able to wrap up this year-long project is far from smooth. I sat down with Nobles’ partner in her Harwinton home office.
“My name is Lisa Arsego, and I’m the owner of AK Enterprises. We are a building and remodeling in the state of Connecticut.”
Arsego started the business almost ten years ago, and she says the early years were slow going.
“Just when we were getting our feet on the ground and our name out, and contacts and people asking us to bid, the construction industry just pretty much died for a while.”
But hope arrived in the middle of the recession, when they were asked to bid on the Middletown project by general contractor Enterprise Builders.
“It was the first contract of that amount that I had ever taken on. And I knew that I could financially take care of most of it. I just needed a little extra help. I’d been in business a long time, I own property, I’ve always had good credit, and I didn’t feel that I would have a problem.”
In fact she needed to find about 10% of the value of the contract so that she could meet payroll on the year-long undertaking. She went to three different conventional lenders, including the bank where she’s had her personal and business accounts for many years, and asked the to take the equity in her home as collateral on the loan.
“They told me the same thing: my income to debt ratio just didn’t meet their criteria for 2008-2009. Everywhere I went either they were uninformed, or I ran into brick walls, I was almost treated with animosity most of the time because I had such a terrible year financially and I was almost made to feel I was the only one having a hard time.”
Because Arsego had thought financing would be no problem, AK Enterprises was already hard at work in Middletown, and taking on extra employees.
“The first month’s payroll was not exorbitant, but I knew by April 1st with 11 or 12 or 13 people on the books, that I would have a large payroll every week. And it was the payroll that I was concerned about. I do not expect any employee of mine to go without his paycheck every Friday.”
She got within days of being unable to meet that payroll when she finally found the Community Economic Development Fund, a Meriden based microlender that works with small businesses who’ve been turned away by the banks. She said they took a look at the very same financial paperwork, and confirmed they could work with her.
“And within two weeks they had secured an equity line on the equity on my home. That enabled me number one to breathe, to sleep again at night. And to continue with the project with absolutely no worries that I was going to run short in any way.”
Arsego says finding that financing not only saved her business, but it means she’ll be able to take on more work in the near future.
“So I now have that confidence – I’m not afraid to grow, to bid on bigger contracts than I was in the past. Also I did put at least a dozen gentlemen to work that may or may not have had as much work or any work last year.”
Arsego’s experience with the banks left her baffled and frustrated, and she says there’s no reason why it should be so hard for viable small businesses to find an alternative lender.
"The state of Connecticut should be backing small businesses to keep them here in Connecticut and to help them grow. There isn’t anyone giving small businesses direction."
With one in three businesses in the state currently saying that financing is hard to come by, AK Enterprises is not alone.
For WNPR, I'm Harriet Jones.