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CHRISTINA VEIDERS

WASHINGTON — Times have changed when it comes to independents obtaining loans.

While credit is available, borrowing money will be more costly and the terms tougher, said Mike Novak, vice president of commercial lending at National Consumer Cooperative Bank, based here.

NCB was originally established by Congress to serve consumer and small-business cooperatives such as retailer-owned wholesaler cooperatives and their members. NCB has a long-term relationship with the National Grocers Association and many years of experience in lending to independent grocers.

“Obviously, we are in much different times. Credit will be available, but it is going to be more of a seller's [the lending institution] market,” Novak told SN. That means a lot more scrutiny will be applied to those seeking loans of $1 million or more. It used to be that an independent could get $1 million for a renovation; now lenders will want to see $100,000 to $200,000 on hand going into a project, said Novak.

“You are not going to have banks lightening up on covenants or interest rates to win deals,” he added. While interest rates may be low now, grocers can expect the spreads to be higher. Novak said that even large corporations are borrowing at 2%-3% higher terms than they were a year ago.

Lenders like NCB will also focus on profits, which means loan deals will favor those borrowers willing to move their finances to the lender. “We are going to focus on the more profitable relationships. Those that have moved their cash management — moved everything over to a bank — to get a deal done. That is going to be something that really dictates if credit is going to be available.”

While everyone is hoping for some miracle financial turnaround come Jan. 20 when President-elect Obama is sworn into office, Novak doubts it will happen. He expects a slow recovery. Money will be there to lend to good grocery operators, he said.

“Grocers are going to have to promote themselves, have good business plans and financial reporting and equity in their companies, or equity going into a project. We are going to want to know there are good financial controls in place and that we can rely on the financial statement.”