Small & Independent Hotels: Finding Alternatives

Often, independent properties are family-owned businesses. Whether through a bank or SBA mortgages, their entire worth is rolled into the venture. Many of these owners have worked a lifetime for their businesses, which have provided comfort and pride in the good times, and required cutting back in the lean years. But the game has changed in this last economic downturn.

Early on, many of these independent owners were mortgaged in small, community banks where decisions were made locally. Owners did business on a handshake, and entire communities pulled together to help fellow neighbors and businesses to survive. In this last recession, many of the small, community-owned banks were sold to larger national, or regional banks. Attitudes changed, and new owners were unfamiliar with small businesses that resided in the banks’ communities.
 
As the housing industry crashed, regulators put more pressure on banks to rid themselves of categories of business they deemed risky. Those risks were measured by large numbers of defaults within a specific category, various types of businesses that were labeled as toxic, and large numbers of catastrophic events that took place in recent years. The banks were told to rid themselves of related assets in the same category whether or not the businesses were fine or weak. They simply felt the banks’ bottom line would be stronger without that category in their mix.

 That is where Spur of the Moment Ranch found itself in late 2009. Our community bank was sold. Decisions were being made in a large city hundreds of miles away. The people we worked with at that bank began to put pressure on us, demanding more paperwork, renewing notes more often, fining us for being late for payments they had authorization to pull but would not pull until the latest paperwork was signed. Some of the local bank officials we had worked with began to retire under pressure from both directions.

We made it through the year, and signed for another six months in January 2010. At that point, the handwriting was on the wall. The bank wanted to close us down for any reason it could find.

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Friends actually gave us good advice and steered us to a credit union in a neighboring community. Luckily, it is a large credit union able to handle business loans. I started an account there, and made an appointment to see one of the commercial lenders to tell her our story. It took from January until June to complete the paperwork. There was a new appraisal, personal visit to our property, and scrutiny by their board of directors for final approval. I cannot say enough about how the move has changed our lives. They spent time with us to work out a plan to make our financial lives easier and less stressful. There are few fees involved, which helps our bottom line, and at the end of 2010 the ranch was given back a small percentage of the interest that we had paid in.

There are ways for small business owners to successfully deal with a less friendly banking environment, but they need to watch for ominous signs of trouble with their financial institutions. They should be proactive in searching for alternatives that can benefit them and their small business situation. Network with other small businesses in your area; chances are they are experiencing some similarities to your situation.

Ann Maletzke is owner and operator of Spur of the Moment Ranch in Wisconsin.

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