Updated March 23 at 2:23pm

Five Questions With Grafton H. ‘Cap’ Willey IV

Grafton H. “Cap” Willey IV, co-chair of the Rhode Island chapter of the Smaller Business Association of New England, gives a few opinions about what challenges the small business community faces right now.

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Five Questions With Grafton H. ‘Cap’ Willey IV


If anyone has their pulse on what small businesses are thinking, it’s Grafton H. “Cap” Willey IV, the managing director of CBIZ Tofias’ Newport office, as well as the co-chair of the Rhode Island chapter of the Smaller Business Association of New England. As the new year starts, he gives a few opinions about what challenges the small business community faces right now.

PBN: With residential mortgage rates at all-time lows, do you see commercial real estate rates running in parallel? Or will they rise, and why?

WILLEY: While residential mortgage rates are at historic lows, the credit requirements have become much tighter and the appraisal valuations are coming in much more conservative. The other shoe has not completely fallen on the commercial real estate market. I have not seen a strong interest in banks to finance commercial real estate, and while the base rates have come down, the risk premiums, the vacancy assumptions, and debt-to-equity requirements have increased. Owner-occupied commercial real estate has a better chance of getting financed than commercial rental real estate.

PBN: What of business lending rates for operations? Are they low these days compared with a year ago, with before the credit crunch?

WILLEY: Business lending rates are usually based on prime or Libor plus arrangement. These rates are at historic lows. Most banks will tell you they have cash to lend, but the regulator and the credit departments are tightening the requirements. Access to capital is still a major issue to the small business sector, and the ability to get financing is limited to any business that has struggled during the recession. Small businesses have been squeezed by their vendors on one side tightening their terms and their customers on the other side stretching out their payment terms. Credit scores have been dropped while the lenders have increased their scoring requirements resulting in a continued credit crunch. Lenders will tell you that they do not see the demand and to a certain extent they are correct. The economy is still faced with a huge amount of uncertainty, which has made the small business sector very cautious about expansion and in many cases businesses are still hunkered down.

PBN: There seem to be signs that the U.S. economy is improving slowly. What do you see in the region for the coming year?

WILLEY: There are signs that the U.S. economy is in a very slow recovery. That recovery is shaky at best and weighted down with great uncertainty concerns. Lack of strong consumer demand, concerns about the international situations, and watching the dysfunction coming out of our government in Washington all contribute to the uncertainty which is holding back sustained economic growth. Locally I see the Massachusetts and Connecticut economies in a much stronger recovery than Rhode Island, which is still mired in high unemployment and perceived negative business climate crisis. We are making some progress, but we should be much further along the road to recovery.

PBN: Do you believe that small businesses will grow in 2012 at a faster rate than the rest of the economy?

WILLEY: Usually the small business sector leads the economy out of economic recessions creating the net new jobs. This recovery has tended to be a jobless recovery compared to other historical recoveries. Small businesses appear to be very concerned about the sustainability of this recovery and the uncertainty of what the ultimate costs of hiring additional people will be. They are watching our government attempt to apply short-term patchwork solutions to the problems – if they can pass anything – which makes long-term planning impossible. Perhaps the last example of Washington passing a two-month extension of a payroll cut has carried this short term thinking to a new level.

PBN: When you attend national gatherings, what are the issues that you hear from small business elsewhere? Are they similar or different to what you hear here?

WILLEY: As I attend national conferences of small business people, many of the issues are universal. They include lack of sales demand, access to capital, overbearing regulation that lacks common sense applications, costs of health care and taxation. There are variations in different areas with some areas doing much better economically than others. While Rhode Island is not out of the woods economically yet, I have been able to tell people around the country some of the positive things that Rhode Island has recently done such as the personal income reform and pension reform. They get positive responses.


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