News Roundup: The Importance of Commercial Density, Combating Crime Proactively, Reinventing MLK, Bank Local, The Misappropriation of ED Incentives

Commercial or Residential Density: Which is Most Important?
Urban Kchoze presents a detailed analysis of the relationship between commercial density and residential density to uncover which promotes walkability more. Spoiler alert: commercial density. They also incorporate an interesting new metric, "farthest commercial use."

Urban Planning Practice Shows How Design Can Combat Crime

This design guide's prescription is to be proactive not reactive to crime. Good design and maintenance of the public space prevents crime from even happening. The alternative - NOT suggested - is to react to crime by adding more measures that further label the area as a target of crime.  

The Remaking of Martin Luther King Streets

City Lab looks at the reinvention of the more than 900 street and thoroughfares named after the late Martin Luther King Jr.

How to Find a Bank That Invests in Your Local Economy

Eat Local...Buy Local...Now there is Bank Local. According to the article, banks with more than $100B in assets accounted for 27% of small business lending while those with $10B or fewer assets accounted for 54% - demonstrating that small and ostensibly local banks support and finance local and small businesses.

Website capture of local banks near Jackson Heights.

How Economic Development Incentives Hurt Small Businesses

This piece discusses incentive programs and how many states wanted to help small businesses, but the majority of incentives went to large corporations. According to their research, large companies captured between 80 and 96 percent of these small business incentives.

Hurricane Relief Resources for Commercial District Managers

As a New York-based organization, our heart goes out to the millions affected by Hurricane Sandy. In Jackson Heights, Queens, where our offices are located, the effects were minimal. Many trees fell, but miraculously there was little damage to structures. 

Across the City, Business Improvement Districts are now mobilizing for recovery as many of local businesses continue to feel the impact of the hurricane. In our local BID,the 82nd Street Partnership, a number of signs and awning have been damaged that will need repair. But other than that we fared pretty well. 

See below for a good overview of resources, sent by the Flatiron BID District this morning.

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New York City, including the Department of Small Business Services (SBS) and the New York City Economic Development Corporation (NYCEDC), is coordinating a set of services to assist small businesses in recovering from Hurricane Sandy. Below is an outline of available programs and relevant contact information. 

New York City Business Assistance Programs

For small- to mid-sized businesses that have experienced business interruption

Emergency loans will be available, patterned after similar programs deployed in past emergencies. Loans will be capped at $10,000. Please click this link to contact an NYC Business Solutions Account Manager or call 311 and ask for NYC Business Emergency Loan.

For mid- to large-sized businesses that need to undertake rebuilding

An emergency sales tax letter from New York City Industrial Development Authority (IDA) will be available allowing businesses to avoid payment of New York City and New York State sales taxes on materials purchased for rebuilding. IDA will also waive all fees and, while following State law, look to streamline its normal procedure. This program is expected to offer economic benefits to reconstruction projects costing $500,000 or more. Please contact Shin Mitsugi atsmitsugi@nycedc.com for further information on this program.

For any business that is temporarily displaced from its space

Short-term "swing" office space at Brooklyn Army Terminal available free of charge for the next30 days. NYCEDC has approximately 40,000 square feet of warehouse space at the Terminal that can be used for this purpose. Please click this link to contact an NYC Business Solutions Account Manager or call 311 and ask for NYC Business Solutions.

For any business in need of other emergency assistance

The SBS Business Outreach Team and Emergency Response Unit's Large Scale Response Team will be deployed after the storm to help all impacted small businesses. This team is currently on-call for any storm-related business inquiries and is closely coordinating with the NYC Office of Emergency Management. Please click this link to contact an NYC Business Solutions Account Manager or call 311 and ask for NYC Business Solutions. 

Federal Aid Programs for Disaster Recovery

Click here for information from the Federal Small Business Administration on disaster recovery assistance.

Small businesses and the digital divide

A few years ago I was doing work in a New Jersey commercial district known for its community of mostly immigrant small business owners. The local economic development corporation had spent at least a year convincing one particular local restaurant owner that he needed to computerize - until then you would catch him pulling out wads of hundred dollar bills whenever he had to pay a vendor. Not only did the failure to maintain proper accounting controls likely affect his profit margin, making it more difficult to manage costs, it had another significant downside. When the business owner wanted to renovate and approached a local bank for a loan, he was soundly rejected. Without proof of income, banks were unwilling to lend to the business owner for a much needed renovation and expansion. Not only was his business growth stymied, the renovations would have turned a trash-filled empty lot into nice outdoor dining. This improvement would have signaled a real change for the district - and perhaps helped other businesses as well.

A new report out by the Center for an Urban Future entitled "Smarter Small Businesses" confirms the depth of this problem - one that is particularly acute many lower-income, minority communities. While nearly 9 out of 10 respondents report having a computer, as many as one in five low- to moderate-income proprietors did not. Getting bank loans is one thing, but the failure to embrace technology is hurting these proprietors in ways that they may not even understand. As more and more people look to the internet for shopping, dining and entertainment recommendations, the failure to have a website, or to engage with social media in strategic ways means missed opportunities to grow a clientele. What can commercial district practitioners do to reverse this trend? Here are a few ideas culled from the report as well as my own experience:

• Greater education is key. Connect with resource providers who can offer classes in the basics, like Quickbooks or marketing through social media. For commercial districts with large non-english speaking populations, see if its possible to offer instruction in the languages spoken by local business owners. Get these providers to come to your district to offer these classes - making attendance for busy business owners a bit easier. 
• Offer access to direct technical assistance. Considering hiring a professional technology consultant to help businesses develop and maintain basic websites, or to set up accounting in Quickbooks. As the report notes, not every business needs a website, but for many district businesses a website will help draw customers. Some businesses can by-pass a traditional website entirely and just go for a Facebook page...an increasingly popular option. 
• If your businesses don't have an on-line presence, create one for them. Use your district website. Make sure you have a district directory where their businesses are listed. If you have a twitter feed, offer to tweet their specials or sales to your followers.
• Support peer-to-peer networking among your local businesses. Host mixers and invite speakers to meetings and breakfasts. Business owners are more likely to adopt tools if they see their peers using them. 

I encourage everyone to read this report - it is chock full of good data and insights, and many of you will likely find the stories and anecdotes extremely familiar. 

Special “Small Business” Series Part 2: Bar Marco, two weeks until opening...

In Part 2 of this series, we follow the story of Bar Marco in the Strip District in Pittsburgh and how their epic struggles to secure a $40k loan could make or break their business - before they've served their first customer. Follow their story on Facebook...and expect to drool over the wonderful pictures of authentic tapas that they have been cooking, enjoying and plan (hopefully!) to serve for customers very soon!

Partners from l to r. Michael Kreha, Justin Steel,
Bobby Fry and Kevin Cox

Partners Bobby Fry, Justin Steel, Kevin Cox, and Michael Kreha are working furiously, staying up nights drilling steel and getting the kitchen ready to open their wine and tapas bar in Pittsburgh's Strip District. Yet Bobby's frustration is palpable. In about two weeks, Bar Marco will open its doors. To date, these guys have personally financed $169k in renovations and it shows. Michael is an architect designing custom fixtures (take a peek at the lovely chandelier, below) and taking great care to uncover and preserve the features that make this firehouse so unique and beautiful.

Yet their investment, and essentially their life savings, is at risk. Why? Because what they need right now is a $40k loan to open - and stay open. None of the partners have debt, all have good credit scores, and the nominal $400/month debt payment on the loan is more than doable, particularly given the fact that at least one of the partners has retained his well-paid full time job. Yet they still can't get a loan.  

What is the problem here?

Initially, Bobby admits they overreached by trying to finance a much larger loan. But they quickly scaled back those plans and decided to phase the project instead, allowing them to self-finance much of it (with help from friends and family). With the focus squarely on opening the ground floor of the firehouse as a Phase I, the need for financing was significantly reduced.

A custom-designed chandelier
graces the restored tin ceilings

At that point, Bobby and his partners pursued loans from traditional and non-traditional lenders...all to the same end. Loans were rejected, after promising starts. In the beginning, Bobby noted that his first meetings with loan officers were always enthusiastic, but by the time the project moved up the ladder to more senior loan officers, somehow the excitement and opportunitity, and what made their project compelling and irresistable, got lost in translation.

What's interesting is Bobby's take on the challenges. Bobby comes from a finance background, having spent a few years on Wall Street working in the financial industry. So his insight is particularly relavent. He believes the challenges that he and his partners face point to systematic problems with the entire financial system. For someone like myself with limited knowledge about the inner workings of the financial system, his commentary was really eye opening...

The loss of relationship lending has hurt "Main Street" businesses

Gone are the days when the decision to provide financing was made by the guy in the front office. In the days of "relationship lending", decisions were made in part on the "soft" information that loans officers collected. In the case of Bar Marco, every loan officer who walked through their space and saw first hand what they have done was enthusiastic. But for some reason that enthusiasm didn't translate to the lending application. This in part because small banks no longer exist. These smaller banks have been gobbled up by larger banks and lending institutions and now have multiple managerial layers. The wiggle room on decision making got narrower, and as loan applications moved up the totem pole, something, clearly gets lost in translation.

Willing to pay a higher interest rate, but not offered the option

Bobby also squarley points the finger at national monetary policy. In his customarily frank way, he expressed frustration at the fact that he and his partners would have gladly paid for a higher interest loan - but instead found loan officers who were "trying to cram 3% loans down our throats" and then rejecting them because they were too risky, young and 'inexperienced'. Bobby believes there is a huge disconnect in how lenders approach projects and how they assess risk. If a loan is riskier, raise the interest rate to reflect the higher level of risk, right? Sounds reasonable...

Love the fixtures...

What is even crazier is that the partners were willing to use their liqour license as collateral, but have found that while the license itself is of greater value than the loan they seek, it is an untraditional form of collateral that lenders are not willing to use.

Alternative Financing

One option is crowd-source financing or "crowd funding". It essentially involves going directly to the community to finance a project. For a business as engaged with the local community as this one, it seems like a promising idea. According to Wikipedia crowd funding describes the "collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the Internet, to support efforts initiated by other people or organizations." Although it may be late in the game for Bar Marco to do this (two weeks and counting!), Bobby is still exploring one crowd funding option - kickstarter.com - which helped a brewery in Pittsburgh raise almost $200k.

At this point, they also plan to continue pressing lenders, finding any way possible to get them into the space to show them what they've done in efforts to revisit lending opportunities.

In the meantime, the countdown clock continues. Will Bar Marco sit beautifully restored and ready for business, yet empty but for a relatively small gap in financing? I sure hope not, but the story is still unfolding. Stay tuned...