Has credit crunch hit Main Street?

By Derek Spellman

dspellman@joplinglobe.com

As stocks surged Monday and Wall Street barons met the Bush administration to talk about the bailout, Gary “Cat” Johnson was thinking about his business, that, while not on Main Street, is close.

Business at Cat Johnson Auto Sales, 1522 Broadway, Joplin, has been “kind of spotty” but “by no means in the tank,” he said.

Around the country, some auto dealers have been hard hit by tightening credit after the collapse and/or bailout of Wall Street companies, but Johnson says credit is not a problem either for him or his customers.

“Localwise, it’s not too bad,” he said.

Johnson said he is more concerned about customers who, unnerved by what they have been hearing and reading about, will grow skittish because of the “negativity in the news.”

While there are accounts of businesses — especially small businesses — being shut off from lines of credit and struggling to get short-term loans for inventories or payroll, a survey of Joplin area bankers, businesses and developers found most have not been impacted. Some said the lending environment is tougher, but not stifling.

Most said they thought the national credit market impacted them obliquely: The credit crunch affects the national economy, which in turn shapes public sentiment and can make people reluctant to spend or apply for loans.

Local businesses said they have not seen evidence that Southwest Missouri is headed toward a recession. Not so far, anyway, and they are hoping that the area’s diverse, regional economy will offer a bulwark against a downturn.

Downtown

In the midst of Wall Street’s chaos, Matt Miller, of Matt Miller Co., plans the public unveiling of 26 loft apartments on the top floor of the former Howsmon/Christman buildings in downtown Joplin. Nov. 1 is the move-in date for all pre-leased tenants, although Miller is hosting an open house today and plans another next weekend.

The buildings, also called Main Street Place, occupy 501-513 Main St.

Miller, a Springfield-based developer, has converted the top floors into a series of loft apartments offering a “modern metropolitan style while reflecting the structural allure of the 1900s era” through historic restoration. The bottom floor is to house businesses, and Miller and his company are courting commercial tenants.

“We are hopeful that we can reach out to the Joplin business community,” said Miller, who has invested about $3.5 million in construction and renovation. He had financing for the project before the credit crunch.

“It is definitely a different lending environment than a year ago,” he said. “There is no question we have seen a tightening of the credit markets.”

The current climate would be tough for start-up companies in his line of work, although developers with a track record should have less difficulty and Miller said he did not anticipate problems in obtaining financing for future projects.

He also expressed optimism for the Main Street Place project. Between one-third and one-half of all the loft apartments have already been leased, he said, and there are already signs that Joplin’s downtown is undergoing a renaissance.

He also argued that Southwest Missouri has fared better than other parts of the country.

“We didn’t see the boom quite like California or the West Coast,” he said, noting that this area is being spared from the bust now gripping those areas.

Mark Williams is among local developers who have acquired about a half-dozen historical buildings in downtown Joplin and plan on investing a total of about $18 million in the projects.

Williams said some banks have been tightening up — asking for additional investors and more money down or doing loans on individual phases of projects as opposed to projects as a whole, but overall Williams also said that developers with good equity and good plans for projects can still get financing.

He further said that while some banks have tightened up, others have shown strong interest in financing projects. Williams said his bank — Great Southern — has been great to work with on his projects.

By the numbers

The Small Business Administration office in Springfield reported that in Jasper County a total of 60 SBA-backed loans totaling $12.9 million were approved during the fiscal year that ended Sept. 30. The numbers for Newton County were 15 loans totaling $4 million. Those figures reflect an increase over the 2007 fiscal year, where Jasper County reported 59 loans approved totaling $12.4 million and Newton County posted 11 loans totaling $4 million.

But nationwide, lending through the SBA’s programs dropped significantly this last year. The SBA approved 69,434 business loans, down more than 30 percent from the previous year. The total dollar volume of those loans was $12.7 billion, down more than 11 percent.

Jim Krudwig, director of the Small Business Development Center at Missouri Southern State University, said banks are still willing to loan but are “a little more conservative.”

A business with good credit and a business plan can still obtain financing, although they might have to put 20 percent down on the project, he said. “It just depends on the bank and the loan officer.”

Other indicators about the Joplin economy are mixed.

Construction in the city from October 2007 through the end of September came to $84.78 million, compared to $112.64 million last year for the same 11-month period. The city’s fiscal year ends Oct. 31 and last year the city set a record with $128.1 million in construction.

But this year’s building permits reflect only one seven-figure construction project by the private sector. There also have been 50 fewer housing starts and only half as many new business starts as last year.

A report by the Federal Reserve Bank of Kansas City released this summer showed the number of Joplin homes with subprime loans in foreclosure stood at 4 percent, compared to 8 percent nationally, and local bankers attribute that to the fact that local housing prices haven’t lost value and to better documentation when making the loans.

CNNMoney.com. which tracks real-estate prices, shows the value of homes in the Joplin area was up 0.8 percent in 2008 and is projected to be up 0.6 percent next year.

That compares to other markets such as Las Vegas, Miami, Phoenix and Los Angeles, for example, that have seen declines of 20 percent or greater in housing.

‘Not an issue’

Several local bankers said they had not changed their standards despite Wall Street’s problems.

Fred Osborn, president of Commerce Bank in Joplin, said his bank has employed conservative standards in the past and, aside from “some modifications here and there,” has not tightened its standards.

Alden Buerge, chairman and chief executive officer of First State Bank of Joplin, said his bank has not had to tighten standards and that it is “pretty much business as usual.”

He also has emphasized that community banks such as his are different than investment banks, with community banks much more tightly regulated and with deposits that are insured.

Gary Denney, chairman and chief executive officer of Southwest Missouri Bank, also said his bank has not changed its standards.

Both Denney and Buerge said their banks fund loans and operations through local deposits, as opposed to borrowing money from other banks. That, they said, has insulated them from the credit crunch affecting the rest of the country.

Denney also said he thought this area never fell into the “excesses” that have been devastating to other parts of the country.

“Availability of credit is not an issue (locally),” he said.

But Denney said he does anticipate the number of loan applications submitted at his bank to decrease as consumers, watching what has been going on nationally, tighten their spending and grow more reluctant to assume debt.

The months ahead

Locally, several businesses maintained they have not been affected by the credit market.

Emily Stanley, a spokeswoman for Empire District Electric Co., said the company obtained a $150 million line of credit in 2005 and that line has been sufficient to meet the company’s needs, including capital projects.

“We find that we are in a fine situation right now,” she said.

Robert Harding, president of Joe Harding Inc., a supplier of restaurant and commercial food service equipment, said he has not seen any issues with credit. He has a revolving loan with a local bank, and he does not anticipate any effect on his operation.

He is watching consumer spending though.

Business is fine right now, he said, but he is concerned that he will see an impact if the national economic conditions persist and people start going to restaurants less frequently.

Audie Dennis, vice president of marketing at Boyd Metals and the chairman of the Joplin Area Chamber of Commerce’s board of directors, said credit has not been a factor there, either. Boyd Metals is a full-line steel service center and distributor.

“Our relationship with our banks has not changed a bit,” he said.

The Associated Press contributed to this report.

Open house

The Matt Miller Co. will offer an open house and tours of the lofts at Main Street Place from 2 to 4 p.m. today.

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