Banks are giving small businesses a helping hand

Alicia Estrada (left) founder of the clothing company Stop Staring, talks with online coordinator Diane Gonzalez in the showroom of the Paramount, Calif., enterprise.
Ricardo DeAratanha | MCT
Alicia Estrada (left) founder of the clothing company Stop Staring, talks with online coordinator Diane Gonzalez in the showroom of the Paramount, Calif., enterprise.
Posted July 11, 2012, at 10:18 p.m.

LOS ANGELES — Fashion designer Alicia Estrada has gone from selling homemade dresses at rockabilly concerts and car shows to running a booming clothing line.

After running Stop Staring for 14 years, she wants to expand at a time when the economy is making it hard for entrepreneurs to succeed and banks aren’t lending like they used to.

She’s now getting help from an unlikely source: Wall Street.

UBS, Switzerland’s biggest bank, put her in a program that matches small-business owners with financial advisors and business experts. Estrada is one of 10 Los Angeles entrepreneurs whom the bank is connecting with mentors and helping to finance their expansion.

Similar programs are run by financial giants such as JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., Goldman Sachs Group Inc. and Wells Fargo & Co.

“I didn’t really know a lot about UBS before this, who they were, what they did and what they were about, but I feel like the program is a really good idea,” Estrada said. “It’s teaching business owners how to fish, instead of just giving them a fish.”

The program comes at a time when small businesses, touted as an engine of economic growth, need all the help they can get.

A recent report by the National Federation of Independent Business, a nonprofit lobbying group, said its small business optimism index fell for May on the negative economic outlook. Only 7 percent of small businesses said now is a good time to expand, according to the report.

“If [the banks] take people with good ideas that don’t have the business experience to get them off the ground, then that’s helpful,” said Christopher Thornberg of Beacon Economics. “The complexity of a small-business operation grows quickly. It’s good to have a hand up.”

The UBS program is a relief for Estrada, 40, whose 26 full-time employees can’t keep up with demand. “I felt like I’d been walking on tippy toes this whole time,” she said.

The program’s participants are not startups but established entrepreneurs who have gotten as big as they can, given their limited business acumen.

“We’re not backing business plans,” said UBS Group Americas Chief Executive Bob McCann. “We’re backing people who have had some success.”

Estrada has made it this far without so much as a written elevator pitch, let alone a business plan. Still, her 1940s- and 50s-style dresses sell faster than she can order them, she said.

She recently gave UBS financial advisors Seth Radow and Glen Titan a tour of the facilities — the showroom where celebrities and buyers check out the top products, the warehouse filled with 30,000 dresses, the old photo studio that now serves as fabric storage.

Radow and Titan — with help from HBO producer Anne Thomopoulos — have six months to help Estrada turn Stop Staring into an exploding business.

The UBS effort, called Elevating Entrepreneurs, is the second version of the bank’s small-business advisory program that launched last year. The bank is also making $10 million in loans available for small businesses in L.A.

Other major financial institutions have designed targeted programs for financing and mentoring small businesses.

Goldman Sachs has partnered with Los Angeles Mayor Antonio Villaraigosa’s office on a training program for small-business owners. This is the third year of their five-year commitment, and they look for businesses with a three-year track record and at least $2 million in revenue.

Citigroup has worked with the city of L.A. and the Los Angeles Housing Department on a program to train local minority-owned real estate entrepreneurs. That program includes the availability of 25 housing contracts.

In Chase’s Mission Small Business program, entrepreneurs use social media to compete for 12 $250,000 grants.

Such moves are an effective way of stimulating small business, said Sue Baaden, Los Angeles regional manager for Chase Business Banking. “That’s really been our focus, to make a bigger impact through very targeted programs.”

But some experts question the programs’ overall effectiveness, reflecting sharp criticism of the big banks in the wake of the financial crisis. The Occupy Wall Street protests accused banks of catering to the nation’s top 1 percent of earners, while ignoring the middle class and poor.

“These programs are helpful, but they’re really a drop in the bucket overall in terms of what these small businesses need,” said John Paglia, a finance professor at Pepperdine University.

Thornberg argues that part of the push may be to improve public relations.

“It’s called venture capital,” he said of the programs. “I don’t know if you’ve noticed this, but the banks have taken a bit of a black eye lately. Politicians have been pushing them to do this kind of thing.”

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