Industry and Local Trends

SBA Activity in Charlotte Grows, Along With Opportunities

Road map of North Carolina with a pin on Charlotte for "SBA Activity in Charlotte Grows, Along With

Business is booming in Charlotte, North Carolina, and this trend seems unlikely to subside. Many key variables are on the rise, from the city’s population and availability of jobs to the number of companies bringing their headquarters to the city. This environment, and the state of the economy overall, provides significant opportunity for business lending, especially where small businesses are concerned. We spoke with Michael Hughes, SBA Business Development Officer and VP at SunTrust Bank, about why Charlotte is such an attractive place for business and how that’s affecting today’s lending environment.

Why has Charlotte become so attractive to businesses of all sizes?

The common thread you hear about Charlotte is the location. It’s a temperate climate with four seasons that’s three hours from the beach and two hours from the mountains. It’s also a very clean city, which is something a lot of people coming from larger cities take note of.

The other thing about Charlotte is it's currently not, I would say, overused. Charlotte continues to build new roads and expand existing ones—there is definitely infrastructure in place. Even now, it only takes about 20 minutes to get across town. Additionally, there are several larger corporations and international companies with headquarters in Charlotte, and these larger corporations create the need for smaller businesses to support their enterprise.

In terms of the business landscape, what trends are you currently seeing in the Charlotte metro area?

Charlotte has a pretty good support network for entrepreneurs, so there's definitely always startup activity. There's also a lot of business acquisition going on. Gen-X folks that have advanced in the corporate world now want to live out a dream and buy a business. Even more noteworthy may be the companies that have historically been just waiting out the recession. Now they’ve made it through and they’re leaner, meaner and starting to feel good about the market with a pent-up desire to grow. The leading indicators out there, for the most part, are positive. That's where I think we see a lot of opportunity for advisors.

Talk a little more about these growth plans. What are companies hoping to accomplish?

Statistically speaking, 54 percent of companies in the $2 million to $10 million range are looking to organically grow. That means they see new lines of business, increased output, expansion and vertical integration on the horizon. They are looking to capture new markets either by increasing the size of the pie or taking a bigger bite. Additionally, 22 percent of companies in that same revenue range plan on purchasing their competitors or acquiring other companies with competitive advantages in order to grow.

How are lenders and advisors able to help companies that are excited to grow?

Companies often need guidance on how to grow their revenue and how to grow strategically and in the right way. This is often where SBA loans can help. A lot of folks think SBA lending is only for startups and Mom-and-Pop shops, and it can be, but it's best utilized with an existing company who's trying to get to the next level. SBA loans are ideal for hyper-growth companies because there's no easy way to finance them without using equity. SBA provides bankers with a great avenue to lend to these companies while supporting the SBA initiative of job creation and economic stabilization. So, if you consider the companies that are creating jobs and stabilizing the local economy, SBA caters very well to both Mom-and-Pops as well as larger companies in the $3 million to $30 million-plus space.

What else about the SBA program makes it a good option for businesses in Charlotte who are hoping to expand?

SBA really is all about growth. It's a large part of what the program is designed for…longer terms, lesser down payments, more cash flow. We see a lot of business acquisitions—that’s about 30 percent of all the transactions we do, either a partner buyout, an individual buying a business, or a business buying a business—a change of ownership. Another big part is providing working capital and allowing businesses to use that to hire more human resources. Those human resources equal more revenue, generally speaking.

What characteristics do lenders look for in potential clients for SBA loans?

Experience is the biggest thing that we look for. We also look for companies that have good infrastructure, good bones. Sound accounting practices. We want to make sure there is reasonable assurance they can repay their debt. And, we want to know companies are actually reinvesting in themselves and are looking for a banking partner—someone who can help advise them on their growth—and not just an order taker or checkbook.

Is there anything else you’d like to share about the commercial lending environment in Charlotte? 

We have a lot of outlets with access to capital in Charlotte, and a lot of people willing to help. If someone is looking for capital, they should become well educated and use the resources available to them. Ask questions. Reach out to more than just the pool of contacts they would normally talk to. Take time to understand the differences between capital structures, interest rates, cost of equity and the opportunity cost of your capital.

Anyone wanting to grow their company needs to examine how to appropriately fund their goals and vision, which goes far beyond fees and interest rates. Business owners need to get their advisors to come in, even if only to provide an opposing opinion and help strategize around the most effective way to grow.

See the trends that are shaping Charlotte

Learn more about the opportunities and key business insights in the Charlotte metro area.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.