CLEVELAND — The COVID pandemic has forced many businesses to adapt their business model to survive until customers feel comfortable shopping in person and going back to farmer's markets.
When those business owners go for loans, they often find that lenders are getting creative when vetting a company to determine if it’s worthy of a loan.
“I’m talking to [a lender], I’m like, ‘Here’s my Instagram, I have a thousand followers,'” said Michael Killik, who founded Killik Hot Sauce Company. “This lady writes it down, and I’m like, huh.”
Killik started his company in April 2019, a few months before farmer's markets were all canceled, making it much harder to sell his hot sauce face-to-face.
He kept producing, selling whatever he could online and in local stores that could stay open in the early days of the pandemic, but he didn’t get any federal assistance. That quickly resulted in $30,000 in credit card debt, pushing him to look for a loan to avoid huge credit card interest rates.
The year before the pandemic, the Federal Reserve Bank said about half of the small businesses applied for a loan.
Bankers tell News 5 the underlying reasons to lend, or not lend, to a small business haven’t changed much over the past few years. But Michael’s lender was doing something that banking experts tell us is getting more common: finding information in unconventional ways.
Since technology and social media are becoming more important to our personal and professional lives, banks are looking for information about how a business is performing.
“Banks probably had to dig deeper or look at businesses in a different light, through the lens of the pandemic and how it impacted businesses,” said PNC Senior Vice President and Business Banking Market Manager for Ohio and Northwest Pennsylvania Ryan Spisak. “We always want to understand a business in its current state, how they’re progressing, what’s their plan, are they faltering, are they growing.”
Businesses can make that work easier by:
- Creating a plan to get through its challenges
- Showing how it followed through on that plan
- Turning to technology when it would help
“Did they put an online storefront in place, and how many followers do they have? Are they getting traction,” said Spisak.
Killik says he recently found out that he got the loan he needed, so he can keep his business going now that he’s able to continue selling his hot sauce in person.
Kevin Berry at WEWS first reported this story.