Louis J. Cappelli started as an 18-year-old mail room messenger at Sterling National Bank and eventually rose through the ranks to become chairman of the New York-based bank.
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A native New Yorker, he served in the U.S. Army from 1951 to 1953 and later graduated from City College of New York. A former member of Mayor Dinkins New York City Council of Economic Advisors, he has been active in a great many civic and charitable organizations, including Meals on Wheels, the Boy Scouts of America, the Federal Reserve Bank of New Yorks Nominating Committee, and the New York City Board of Educations Audit Advisory Committee.
He talked with WebCPA about recent trends he has seen in lending to small businesses.
Could you tell me a bit about the bank? I understand it has been around for 80 years. Has it been involved all that time in lending to small businesses?
Correct. Weve been in the New York metropolitan market, serving small to midsized businesses. We make loans anywhere from $50,000 up to $20 million. We have a cross-section of types of loans we make. We make unsecured, secured, assets based, factoring, leasing, commercial real estate, residential real estate, right across the board. Whatever a small business or a midsized business requires, we provide. Well do service businesses, as well as manufacturers, jobbers, traders. We do trade finance. We open letters of credit for importation of product.
Is this just around New York or across the country?
Id say the primary focus is in metropolitan New York, which is drawing a circle of 75 miles around New York City. That takes in probably 70 million people, so its a pretty deep market. Some of our businesses do go nationwide. Our leasing business and our staffing business are nationwide.
Could you tell me what your bank is doing to lend to small businesses?
Weve been lending to small businesses our entire life. The current conditions have not changed that focus. I think there have been a number of majors who claim to do business with small companies who have probably abandoned the market. There have been a huge number of consolidations that have taken place. Banks have gone out of business, and all of those changes have resulted in small businesses not getting their proper credit.
Do you still see the credit market as being too constricted for small businesses?
Not at Sterling. Were here, were doing business. Our loans are growing. Were interested in that particular arena. But there have been a number of major banks that have come into this area who are not totally focused on small businesses.
The White House has been trying to prod major banks to expand their lending to small businesses and individuals, especially the banks that received the TARP funds. Is that something you would like to see them do more for small businesses?
I think what they should do is they should come here to Sterling and well provide the credit. Were very active. I cant speak for what other institutions do, but I can tell you what we do.
I understand that a lot of banks have complained that the bank regulators and examiners wont allow them to lend as quickly or under the kinds of terms that they used to. Are the capital requirements difficult or more stringent now?
Well, the regulators have raised capital requirements. What that results in is pressure on less lending, and not more lending. Its kind of a paradox. On the one hand the President says he wants banks to lend to small businesses. On the other side, the regulators get tougher on these credits and increase the capital requirements for banks, so theyre at odds. Theyre not walking down the same road.
How do you think they can get in sync?
I think its up to the President. Hes the boss.
What kind of outlook do you see for small business hiring this year?
We have a staffing funding company and we have found thats a pretty good barometer for determining improvement in employment. Every month for the last five months, theres been a ratcheting up of temporary employment. Were pretty optimistic about that.
You think thats a good indicator of where full employment is eventually going to lead?
Yes, because they start in at part time and go on to full time.
Are there any particular industries you see recovering more quickly?
No, we see it across the board.
Are the tax credits that the government is starting to provide to small businesses to encourage them to hire more employees going to help?
Yes, all of those things are favorable. Everything helps.
What about tax breaks for depreciating new equipment purchases? Do you have customers asking for loans to expand their equipment to take advantage of those tax breaks?
No, what drives the business is an increase in sales volume and everything else seems to follow.
How does your bank work with accountants?
We work very closely with accountants. A good deal of our leads come from accountants because the principals will usually work with an accountant. They go to the accountant and say I need a bigger line [of credit], I need to buy equipment, and the accountants are familiar with the lenders. Theyre great sources of introduction. To me, theyre the best.
I understand that your bank offers working capital lines, and asset-based financing, factoring, accounts receivable financing, payroll funding and processing, equipment leasing and financing, and commercial and residential mortgages, and other services. Which of those services seem to be expanding the most among small businesses today?
I would say C&I [commercial and industrial] and asset based and factoring have been very good.
Do you think small businesses are going to see credit expanding more this year?
I think they will. Yes, I think weve bottomed out.