Using Different Tools to Help Small Businesses Survive

January 10, 2010 : The Boston Globe, by Megan Woolhouse

Many small businesses have suffered a double-whammy in a recession where lending is tight and business has slowed. Robert A. Baker, president of the nonprofit Smaller Business Association of New England, said he thinks he can help. He said he has more tools to help small business than their local chamber of commerce. He sat down to talk with Globe reporter Megan Woolhouse about what makes his organization different, where money and opportunities are, and how the growth of Raytheon Company Integrated Defense Systems in Andover is good for small business.

How are you different from a chamber of commerce?

We're not the biggest organization, and we're not the most well-known, but we do the stuff other people don't do . . . embedding ourselves in a company's culture and trying to work the supply chain. It takes time.

Here are two core competencies we have that others don't. We source capital, customizing solutions for businesses that need capital to survive or to grow. We work with their lenders, they're already [involved with the company] for the most part. We try to tailor the package around the lender so it's a win-win for everybody. The second core competency is our relationships.

Are more small businesses coming to you to find money to grow or simply survive?

About 65 percent to survive and 35 to grow. I'm starting to see, as the economy turns, a couple more growth situations. I think a job saved is a job earned. I'm sensitive to both. You can't choke off the capital for growth. We'll get out of this recession with companies that go from $5 to $10 million in growth . . . 50 to 100 employees. It's like the Patriots. It may be just to get a first down . . . I don't think it's going to happen like a long bomb. It's going to happen with a lot of companies working on all cylinders.

Can you give an example of a small business you've helped

There's Cambrooke Foods. This is an interesting story. They just moved from Framingham to Ayer. It's a couple and they make medically prepared foods for kids that have problems like protein deficiency syndrome. The company is named after their two kids who have it. We got them $500,000 in working capital a year and a half ago from the Community Development Finance Association and the Economic Stabilization Trust so they would have money to grow further while looking to raise private equity.

Did they try to get a bank loan?

They really couldn't get it [a loan] from the private sector. There wasn't much collateral.

Who are the nonbank entities a business can get a loan from?

In Massachusetts, we're blessed we have a bunch. The Community Development Financial Corp. (quasi public); the Economic Stability Trust (quasi public); MassDevelopment; a private, nonbank lender called Business Development Capital; and the Property and Casualty Initiative. The Massachusetts Technology Development Corp.

On a different note, how is small business faring under Massachusetts' health care reform rules?

From an altruistic, broad coverage standpoint, it's helped people gain coverage. I think the cost side has challenged small business and they've been patient up to a point. It's really hard to absorb 8-12 percent premiums. The Legislature always thought about coming back to the cost side. There's a bill floating around, a short-term measure to give customers a choice, it's promoted by the Massachusetts Association of Health Plans. . . . 10 to 50 market employers can cap the rate of reimbursement on what they get paid, 110 percent of what Medicaid pays. You limit insurers' surplus to 2 percent and max the medical coverage rationing. What that does on a $1,000 premium is save [a company] $220 a year per employee.

What's the status of the bill?

We had a hearing in November. . . . I'm hoping it gets reported favorably in [the] Ways and Means [Committee].

Absent that, you're going to have another double-digit increase again. It's getting to the point where if business conditions don't improve substantially, unfortunately what's going to happen is they will end up reducing the employer share of contributions. I mean, they have nowhere else to go. And I think that's what we're trying to avoid.