Almost 300,000 Long Islanders work for small businesses in Nassau and Suffolk counties, so when the segment grows, the region’s economy itself receives a recognizable boost.
And that growth often depends on whether small businesses can find capital for loans toward items such as a building new headquarters, hiring employees or even acquiring another company.
Long Island lending institutions say they have organized themselves to support those goals.
Even with the current maze of challenges such as interest rates, regulatory requirements, or a labor crunch during a period of low unemployment, the opportunities appear to be growing, Long Island banking executives say.
“I think there’s a lot of optimism and growth. COVID and related things are behind us, and even in the current (interest) rate environment, that it’s still feasible to grow,” Melvin Madera, New York business banking sales manager at Valley Bank, told LIBN in an interview.
A key piece to the puzzle to regional small businesses is funding provided through the U.S. Small Business Administration. According to 2023 SBA data, the agency had approved almost $1.3 billion in financing to small businesses through lending institutions operating in New York State. As a general rule, companies in manufacturing that employ 500 or fewer or non-manufacturing companies with annual sales of less than $7.5 million qualify as small businesses under SBA rules.
The administration’s primary program is the 7(a) Loan Program, which provides loan guaranties to lenders that, in turn, allow the lenders to provide financial help for small businesses. Under the 7 (a) program, financing can be used for buying or re-financing or improving real estate or buildings, short- and long-term working capital, business debt refinancing, equipment or furniture purchases, or changes in ownership. The maximum loan under 7 (a) is $5 million.
However, financing is still in a tricky period. To start the year, SBA rates on small business loans varied, but were generally at least a couple of points above the 8.5 percent prime lending rate. Additional monthly interest payments, in some cases, can mean the difference between filling a job or not.
Qualifying for the best loan at the best rate, if approved, often means a business should collaborate with the bank to navigate the application maze—SBA or not.
“So the process is really about the small business getting a lot of information about the projections of the business. Do you have a business plan? What are you seeing in terms of what you think you’re going to be able to do?,” said Kevin Santacroce, Long Island market president of ConnectOne Bank.
Cash flow is also a huge question to answer, according to Santacroce
“There is a bit of hand-holding,” he said. ConnectOne, he noted, has attained SBA preferred lender status, which means the bank can make approval decisions on SBA financing itself in-house—eliminating both time and red tape.
The extra help—beyond arranging loans—can be particularly important when business owners seek access to dedicated capital. TD Bank, for example, offers fraud protection capabilities for its customers, said Anthony Esernio, TD Bank’s market president for the New York suburban area.
“We’ll have what we call the small business specialists, or we have a whole set of relationship managers that look at loans for less than a million dollars,” Esernio said. “It is a good idea for anyone to meet directly with a person. Let them talk to the banker.”
There are also additional challenges that small businesses could endure, especially due to current interest rates and credit dependency.
“Bank of America internal data suggests small businesses are relying more on their credit cards as a source of financing,” said Natalie Mouyal-Peleg, small business regional executive for Bank of America. “Rising loan balances may reflect some of the pressures small businesses are under from tighter credit and higher interest rates.”
But, Mouyal-Peleg adds, other data shows “inflation-adjusted balances remain below pre-pandemic levels, even for small businesses with annual revenue greater than $1 million. Elevated deposit levels seem to be supporting small businesses across revenue tiers.”
According to the SBA, small businesses create two out of every three new jobs in the United States. On Long Island, that includes 134,373 jobs in Nassau County and another 145,892 in Suffolk County as recently as 2022, according to New York’s Empire State Development Corp.
Santacroce said that translates into 90,000 small businesses across Nassau and Suffolk. “It’s a very big and important part
of Long Island’s economy,” he noted.
With small business as Long Island’s leading job creator, the region’s unemployment at the end of last quarter registered 3.6 percent—a tick below national unemployment, and well below New York State’s 4.4 percent jobless rate, according to the New York State Department of Labor.
Small business growth on Long Island appears to be taking a variety of different shapes and forms, according to bank executives.
Esernio, for example, said TD Bank has seen a brisk pace of new franchise owners emerging in the region. “For people who want to buy any type of restaurant, any type of franchise—we’ve done very well with startups,” he said.
A benefit to opening a franchise of a larger chain or business, Esernio added, is that the parent company will “tell them how much coffee to buy” or how to gauge inventory or pricing.
Further, Esernio says that healthcare—for example, dentists who wish to leave a larger practice to start their own—has also been a source of small business growth.
Others, like Santacroce of Connect
One, said physical or facility expansion or new construction continues to drive a growing portion of business lending.
Kaitlyn Djakov, Valley Bank’s vice president of SBA lending agrees with this assessment. “It could be a need for new equipment,” she said. “Business acquisitions are a big topic right now. Acquisitions are high.”