Credit crunch

Tighter restrictions on commercial lending have delayed or complicated expansion plans for some northern Nevada businesses, but other business owners haven't had problems securing commercial funding so long as they have deep pockets.

Sushil Patel, owner of the Hampton Inn and soon-to-open Staybridge Suites in South Meadows, plans to build another business-class hotel at Robb Drive and Interstate 80. Patel says developers who are able to buy into their projects with substantial down payments are having an easier time getting construction loans in today's market.

"If you are a little cash-heavy these days you are still OK," he says. "I think folks got used to such low percentages down on buildings. A lot of commercial projects were at 15 to 20 percent or less on loan-to-values, and that affected them. These guys aren't getting loans anymore because they are not putting that much cash down."

Others, while able to secure funding, have not found favorable terms with area banks.

Cindi Anderson and Glen Miller, owners of BigCeramicStore.com in Sparks, recently purchased a 10,599-square-foot industrial space at the Vista Business Park to house their growing online ceramics and pottery business.

The owners had a substantial down payment about 25 percent but quotes for the balance from several local banks, as well as from the Small Business Administration, still ran pretty high.

Anderson and Miller, who moved to Reno from Fremont, Calif. in 2005, had worked with a California-based broker for several years who eventually found them two options for funding but both were from out-of-state banks.

"The first actually was a better deal, but it fizzled out," Anderson says. "The bank got spooked about something; we never found out exactly what maybe because it wasn't a local bank and they weren't comfortable with the Sparks market."

The owners had hoped for a long-term fixed-rate loan to lock in their interest rate, but they only were able to secure a fixed-rate loan for the first five years, at which time the loan goes to an adjustable rate.

But some businesses are having better luck negotiating the lending minefield.

Ashley Morris, president of Capriotti's Sandwich Shop Inc. of Las Vegas, which will open its first location in northern Nevada on South Stanford Drive near the end of the year, says it's been easier to extend the

Capriotti's brand because of lower start-up costs.

"More expensive franchise systems face more challenges," Morris says. "You can be in one of our locations for less that $300,000, and that amount of money is easier to get than a McDonald's that will cost you $1.5 million. We are positioned well because the cost to open one of our franchises is so low."

Morris says the company may turn to SBA lending programs to provide another funding avenue for potential franchisees.

Another problem: Long approval times.

Morris says a franchisee in Montana waited several months for loan approval.

"What should be a three-week process is turning into three months because banks don't have the money to lend. That is one of the challenges banks are facing."

Hampton Inn's Patel says with today's lower interest rates it's actually cheaper to borrow money now than it was a few years ago but that fact also has worked against some developers as banks have grown conservative because of lower profit margins and increased risk.

"When I was doing projects a few years ago and banks were getting 8.5 percent (interest) they were happy, but now that we are getting down to 5 percent or thereabouts, they are not willing to loosen up the capital," Patel says. "Rates have gotten so low even if they have got the ability to do financing they don't want to because they aren't getting the return they used to get."