Bank of America executive: Small business owners doing good job navigating new realities

NEW YORK, N.Y. – Robb Hilson’s job as head of small business banking at Bank of America is to convince small business owners that the bank wants to do business with them.

That’s not easy when small businesses have consistently said in surveys that they find it hard to get loans from banks, and when banks have become more cautious about lending to small companies following the recession. But in the 18 months Hilson has been on the job at the nation’s second-largest bank it has had some success with its 3.2 million small business customers. Last year, Bank of America made $8.7 billion in new loans to small businesses, up 28 per cent from 2011.

“I feel really good about the momentum. There’s obviously more work to do, but we’ve made a lot of progress,” Hilson says.

Hilson, 54, took the job as small business executive in November 2011 soon after Bank of America started placing 1,000 bankers in cities and communities around the country to serve small companies. Bank of America and other big banks began bolstering their small business outreach after they were criticized by company owners and lawmakers for stringent lending standards that prevented many companies from getting loans. Bank of America was also one of the banks that pledged to the Small Business Administration that it would increase its loans to small business.

Hilson previously served larger companies during more than two decades at the bank. This job is very different from anything he has done before.

“It’s a bigger challenge because we’re building a business,” Hilson says. “It’s a different conversation with small business owners. So many of these folks are wearing a bunch of hats. It’s just a different environment than meeting with the CEO.”

Hilson’s role puts him in a position to hear about, and gain understanding, of the problems small business owners face. He recently spoke with The Associated Press about his work and small businesses. Here are excerpts, edited for brevity and clarity:

Q. How do you size up the state of small business today?

A. This most recent downturn by almost any account, if not all accounts, was the steepest, the most dramatic, severe, however you want to characterize it, since the Great Depression. I think it’s also fair to say that small businesses relative to other businesses were particularly hard hit. I think it really speaks to the remarkable resilience of American small business owners that they have come back as far as they have. The economy isn’t perfect, but it continues to slowly but surely get better. We saw small business owners doing a great job of rightsizing their businesses when sales dropped off so dramatically in 2008 and 2009, and they’ve come back. Surveys have told us that despite all the challenges and the recession that they endured, very few of them have second thoughts about getting into business for themselves. They are very confident and optimistic about their own capabilities, less so about things that they don’t have as much control over.

Q. What will it take for small business owners to be more confident?

A. You probably see a little more confidence today than what you saw in November or even last May. I think there were things leading up to the election and all that (that contributed to some pessimism).

I think they’re dealing with this new reality of sluggish growth, very low interest rates and not taking as much risk as they were in 2005. What is it going to take to go back to 2005? I don’t know if we’re going to see that, maybe ever. Certainly not in the near term.

I think we’ll see more optimism than what we’ve seen today. In our survey, we did a subset around the millennials (people age 18-34). The numbers were off the chart versus any other age groups we looked at. They were very optimistic, more likely to hire, more optimistic about where the economy is going and prospects for the near term. As that group becomes a bigger part of the small business owner population, maybe you’ll see some lift there as well.

Q. Suppose a business owner doesn’t qualify for a loan at Bank of America? What do you do?

A. We would give them a pretty good sense of what it would need for them to look like for them to qualify. But we also work with some non-profit organizations in the community that might be able to work with them. Community development financial institutions — these are by and large non-profit financial institutions, and we’ve been one of the biggest supporters of these. They’re smaller organizations that aren’t subject to the same regulations as Federal Deposit Insurance Corp. banks. We extended a $110 million grant a couple of years ago to some CDFIs that turned around and leveraged that to the tune of more than 10 times. So they were able to leverage that to more than $100 million that they could then invest or lend directly to small businesses.

If we’re not able to help a client today from a credit standpoint, our goal would be to give them a pretty good sense of, what were the gaps, and what they would need to work on to make the answer a positive one the next time around.

There are other opportunities for us to help them, not just with credit. There are opportunities for us to help improve their cash flow by helping them collect payments, for instance.

Q. What results are you seeing from the 1,000 bankers you’ve placed around the country?

A. We have a lot of nice charts with impressive trend lines. Let’s talk business lending. I think it’s safe to say that small business owners, their health continues to improve, so balance sheets and cash flows are getting stronger, interest rates are at an all-time low. So it’s a good environment to borrow in. The economy, while not robust, continues to grow. Translated, that equals greater loan demand, and our bankers have a lot to do with that. We’re excited that we were up 28 per cent in new loan originations in 2012 over 2011. And through the first four months of this year, we’re ahead of that pace. I feel really good about how we’re delivering credit. But we know we can do more.

We know that the bankers are focused on credit but they’re also focusing on delivering all of our capabilities, not just meeting the needs of the business. They’re also working with other experts, pairing up with financial solutions advisers who will work with small businesses on the personal side — investing solutions, preparing small business owners for retirement or for taking care of their children’s education.

Q. But small business owners are known for plowing every penny they can into their companies. How do you convince them that their personal finances should be more of a priority?

A. I think part of it is our enlightening small business owners about all that we can do for them. They may just be focused on their business, but we will lead a conversation that will provoke them to think about, are they addressing their kids’ college education? Or are they doing some things that would benefit their employees? Are they doing some things that would help them prepare for retirement? Through our Merrill Lynch platform, our financial services associates were able to introduce some expertise that we weren’t having before we deployed this model. We’re taking a more holistic view, not just the business piece of it, but the personal side as well.

Q. What do you feel have been your biggest accomplishments as head of small business at Bank of America?

A. I feel really good about how we have pulled together this organization. We’ve got 3.2 million customers that were up, until 18 months ago, embedded in different parts of this company that we call Bank of America. We’re more thoughtfully organized around them, from a sales perspective, product standpoint and from a service capability. There’s obviously more work to do, but we’ve made a lot of progress in the 18 months.

A majority of the bankers’ time is spent working with existing clients that we haven’t had much of a relationship with or we have a relationship and we want to do more with them. While we love new relationships, the biggest and best opportunity for us today is to do more with what we have.

Q. Why are your biggest opportunities with existing customers?

A. Based on what they do with us, we know there’s a lot more we could do with them. A number of clients that might consider us to be their lead bank, but it’s primarily through basic checking and cash management with us. They don’t necessarily have any borrowing with us. They might have a credit card, but they don’t have a term loan or a building on their property. Or they might have all of that business with us, but they’re not a client of Merrill Lynch. We have a great opportunity on the investing side of the house.

Q. If you were to own a small business, what would it be?

A. I would love to own a little record store. And vinyl is coming back! Vinyl isn’t dead and in fact, it’s thriving and I would love to do it. But what is more likely to happen at some point is I am going to get into a business with one or both of my children. My son is two years out of college and doing very well in a small business here in Miami. It’s a company that’s in this growing field called e-discovery, kind of navigating the legalese in this day and age of social media. And my daughter, an aspiring small business owner, is in her first year at the Culinary Institute of America in Napa Valley. She wants to be an executive chef and own her own restaurant someday.

Q. If you did open this record store, what vinyl would you stock it with?

A. You’d have to start with Sinatra and you’d have to capture some of the current genres. But the cool thing about vinyl is, not only are current bands coming out with that format, you’ve got this huge catalogue of artists that been around a long time, where they’re reissuing these pressings that sound better than ever.