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Exec: Small business mounting comeback

– 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 less than 20 months Hilson, 54, 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 percent 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 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. 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 nonprofit organizations in the community that might be able to work with them. Community development financial institutions – these are by and large nonprofit 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.