By Joseph Wolkin and Gregory Zarb
A large portion of small business owners on Long Island are taking out a higher rate of loans the past months, going from an average of $45,000 to $55,000 as the economic climate changes in the region.
Robert Pospischil went out on a limb, taking out a major loan to acquire the Bissett Nursery Corporation, a wholesale nursery organization, representing an increase in loans with President Donald Trump taking over.
“We spent 18 months negotiating the sale of our company,” Pospischil said. “The industry itself that we — in financial terms — refer to as a fragmental industry, and that means there are a lot of small, little companies. It’s not like other industries like car manufacturers.”
The small business owner presided over SiteOne Landscape Supply LLC in Georgia before acquiring the Bissett companies. As he oversaw the takeover of the Holtsville-based nursery stock organization, he attempted to prepare for what could make or break his career.
“Cheap money,” he said, referring to the economic climate in America. “If you can borrow money at four percent, it’s not hard to borrow that money and make eight or nine percent. When money becomes expensive, that’s when it becomes difficult to find an invest to return on better than what you’re borrowing.”
People do not understand how much their businesses are worth, Theodore Theodoropoulos, Chief Operating Officer of National Business Capital, said. As he stated, there has been an increase of approximately $10,000 on average for loans taken out by small businesses.
This latest trend of small businesses lending more money from banks is one that he believes is leading to a climate that is enabling mergers and acquisitions due to the cheap loan rates.
“In order for small businesses to prepare to take out the loans, they need to just have all of their financial information together and prepared, ” Theodoropoulos said. “They need to also have an opportunity that makes sense to us.”
While Trump is believed to be the main reason as to why small businesses have been taking out small loans, he isn’t one to jump the gun with the blame game.
“You know, I don’t know,” he said about President Trump. “I definitely think Trump has stirred up the economy and got people thinking. He’s pro-business, so I think people that are pro-business kind of appreciate that. It may have caused some of excitement, so let’s see what happens in the next couple of months.”
No matter what political group holds the majority of Congress, a positive economic outlook can lead to an increase in deals, Gregg Schor, Chief Executive Office of Protegrity Advisors, LLC, said. With President Trump in charge, high-end business mergers may not be as frequent, but that is not the case for small businesses in areas prone to growing companies, such as Long Island.
“It seems likely that there will be a reduction in the number of deals at the high end of the market,” Schor said. “But the lower end of the market, where deals are primarily domestic, with no anti-trust or international implications, will remain robust in 2017 and could accelerate given the challenges associated with larger deals and the probability that focus and capital will be re-deployed to a greater number of smaller deals.”