Testimony of Rich Loeffler, Maryland SBDC — Senate Committee on Small Business, August 17, 2023

Summary

Written testimony of Rich Loeffler, a business consultant with the Maryland Small Business Development Center Network (SBDC), before the U.S. Senate Committee on Small Business on August 17, 2023, addressed to Chairman Cardin and committee members. The testimony describes client businesses that adapted during the pandemic and attributes their resilience to ongoing local counseling. It argues that investing in rural SBDCs and expanding access to longer term capital would help rural businesses. It suggests replicating lessons from Economic Injury Disasters Loans (EIDL) during COVID, noting that such capital is now available only with a disaster declaration, and proposes a rural loan product based on income capacity similar to the Covid-era EIDL.

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                     Testimony of Rich Loeffler, Business Consultant for MD SBDC

                               U.S. Senate Committee on Small Business

                                            August 17, 2023

Chairman Cardin and members of the committee, I thank you for allowing me to share some thoughts
from the perspective of a former small business owner who now works with the Maryland Small
Business Development Center Network (SBDC). A little about me -- I was born and raised in New Jersey
and moved to Maryland’s beautiful Eastern Shore for business purposes. I eventually became a partner
in this venture and spent twenty (20+) plus years as a business owner. When I chose to sell out my
shares, we had $50 million dollars in annual sales and employed about 250 people. We were in the
process of buying out our largest competitor, which was going to triple the size of the business. The
business remains a major supplier of metal conveyor belting on the world stage.

Since “retiring” as a small business owner, I have spent over 20 years working with the Maryland SBDC.
I’ve worked with many businesses that showcased great resiliency in the face of adversity. One that
comes to mind is a restaurant that was doing exclusive dining room service when the pandemic turned
their world upside down. They quickly pivoted and developed a take-out menu. They worked hard to
make it easy for their customers to place and pick up their orders efficiently. They even created outdoor
seating that pioneered safe social distancing for those who still wanted a restaurant service experience.

Another client I worked with that has shown the ability to pivot is a distribution business that was
struggling to compete with tightening margins and large competitors taking more market share in the
region. Over several years, they worked on refining their business model with ongoing counseling. They
switched from focusing on distribution to growing their fulfillment services and new product consulting.
They also added some niche manufacturing to help grow their business revenues and increase their
margins. This business continues to engage with our services and is constantly looking for new
opportunities to grow and prosper.

In both cases, what helped these clients remain resilient was they learned to pay attention to their
business models through ongoing engagement with trusted, local counseling. They were working with
someone who really understood their unique business models and provided advisement that was
professional and compassionate. Each developed their own key success indicators in their business
planning process and tracked performance to measure the success of their strategies. It was a
willingness by these clients to continuously learn and engage with the SBDC and other valuable resource
partners in the community that made the difference.

What can be done to make more rural businesses resilient? I honestly believe investing in rural SBDCs is
part of the answer. We get to know our clients with individualized attention and can provide the
ongoing support that businesses need to grow. Our counseling helps clients with limited financial
education learn to pay attention to their key success indicators. We also help them think about
contingencies in the business planning process and understand the importance of developing productive
relationships with resource partners like insurance agents, lenders, and other support professionals.
Having someone who is not involved in the day-to-day operations also gives them access to an external
perspective that is invaluable to any business that hopes to grow. Our services remain one of the best
kept secrets in the business community.
Another factor that is going to impact resiliency is access to longer term capital. The clients who have
the resources to invest in their plans to pivot are going to be the clients that succeed. As the saying goes,
lenders will gladly give you an umbrella when it is sunny outside, but they will ask for it back the
moment it starts to rain. Businesses that are facing challenges can rarely get traditional financing and/or
support from federally guaranteed loan programs. Businesses in these situations are often confronted
with predatory financing with high interest rates and no options for prepayment or restructuring.
Businesses that fall into the trap of subscribing to these types of financing tend to be the businesses that
will ultimately fail.

Replicating some of the lessons learned from successful Economic Injury Disaster Loans (EIDL) during
COVID may be helpful. So many of our clients were saved during the pandemic by being able to spread
their investment over a longer period and at a reasonable interest rate. There was also a relatively easy
underwriting process for EIDL loans, as the country worked to recover from the pandemic. Yet now this
capital is only available if there is a disaster declaration. Small businesses that need to pivot are not
always in regions where there are official Federal emergencies declared. Furthermore, traditional EIDL
loans have much tighter underwriting requirements. Perhaps developing a rural loan product that is
based on similar income capacity as the Covid-era EIDL would support greater resiliency for businesses
that need to develop a pivot strategy.

Thank you again for letting me share this testimony and for your efforts to support rural small
businesses in America.


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