The rush of the lunch crowd has subsided at the Bagel Factory, where hearty sandwiches filled with turkey, melted cheese, au jus and cranberry sauce bearing names like “The Mason” and “The Welder” are on the menu.

On a spring Monday afternoon, Suzanne Hermann, one of the owners of the San Antonio bagel shop, talks with a supplier who stopped by as she preps for tomorrow's early morning commuters ready to place their orders for cheese grits and egg, Serrano pepper, cheddar and salsa sandwiches.

The 3,300-square foot shop, which opened last November, has already exceeded its annual revenue projections, employs 14 and bakes 100 dozen bagels each day, Hermann said. The Bagel Factory was able to secure contracts with a major chain hotel and a prominent local catering service. Discussions are underway to open satellite offices where unbaked bagels are delivered to sites so that recipients can bake them in their own ovens.

“It's crazy busy,” Hermann said. “We're way above projections, we're in the wholesale market, and we're looking at other locations right now” for a second shop.

Because of an SBA Patriot Express loan secured through the $3.7 billion Randolph-Brooks Federal Credit Union in Live Oak, Texas, the Bagel Factory was able to get up and running. However, the journey there was marked with frustration and discouragement as Suzanne and her husband John sought out loans from banks only to be rejected. Suzanne said their long-time bank, USAA, did not offer business loans. Bank of America turned down the couple's request but encouraged them to come back when they were ready to open their second location.

“I was thinking, this is insane. We have excellent credit scores, my husband is a physician, we own several properties. I was discouraged and just ready to pack it in,” Hermann recalled.

The couple also had a track record unlike some budding entrepreneurs making their entry into the restaurant business. They owned and operated a bagel shop in Augusta, Ga., along with three small coffee houses. After Suzanne and John had their second child in 2000, they sold the Georgia shop. John, a military man, re-enlisted and the family moved to San Antonio in 2005. The Hermanns had no intentions of opening a bagel shop in their new hometown, but after former customers who had coincidentally moved from Augusta to San Antonio started asking if they were planning to open up another shop, the couple decided to get a business plan together.

That was the easy part. Suzanne said she was ready to throw up her arms when she got a call from John one afternoon. He had seen a RBFCU billboard touting the cooperative's SBA alliance and told his wife to make a call. It hadn't dawned on Suzanne to reach out to a credit union.

“I always thought credit unions were attached to [military] bases, and you had to be a member,” she said. “I called that same day at 2:00 in the afternoon. I got Kenan Pankau's voice mail. I told him about my experience. He called be back that same day.” Pankau is the CU's SBA program manager.

Prior to seeking out banks for capital, the Hermanns were so sure that they wouldn't have any problems being approved, they had already found a prime location for the bagel shop. Mark Sekula, senior vice president of business services at RBFCU, remembers how organized Suzanne was with the paperwork coupled with the restaurant experience she and her husband brought to the table.

“When someone knows the business of what they do, you get caught up in that passion,” Sekula said. “The tough part about applying is the work that comes in from the front end. Suzanne hit the ground running.”

Within a day of contacting Pankau, the Hermanns were approved for a $380,000 SBA Patriot Express loan, Suzanne said. Launched in June 2007, the loans of up to $500,000 are available to military personnel and their spouses for start-ups, expansion and equipment purchases. They qualify for SBA's maximum guaranty of up to 85% for loans of $150,000 or less and up to 75% for loans over $150,000 and up to $500,000. For loans above $350,000, lenders are required to take all available collateral.

Suzanne said she actually needed $450,000, but thanks to some extra investments, she was able to make up the difference. Her one complaint she is a depreciation requirement on equipment that comes with the loan. The couple had spent $282,000 on brand new equipment for the bagel shop, but because of the guideline, “it depreciated before it walked through the door.” She wondered if the Patriot Express loan was available up to $500,000 and she was still putting down 20%, “Why couldn't I get the full amount?” Regarding the depreciation, Sekula said lenders have to determnie the liquidation value of collateral so that the SBA knows what is considered the unsecured portion of the loan.

Suzanne wanted to aks the depreciation question at a recent roundtable with SBA Administrator Karen Mills and many bankers. Of the two businesses present, she was the only restaurant owner, Suzanne said. Her opportunity never came up as bankers spent the bulk of the session talking about Section 8.

“I said, 'I'm just trying to provide jobs and help the community.'” Indeed, two of the Bagel Factory's employees were recently promoted to assistant managers. “Nothing would make me happier than to have all of them running a bagel shop one day.”

Suzanne said that as jobs are being moved out of America, some are forced to file for unemployment. The scenario really hit home when she offered a job to a married, 25-year old man who weighed whether it would be better to take the position or continue taking unemployment. Suzanne rescinded the offer.

“That's what kills me. It's part of the reason I'm jumping on board with the [Texas Credit Union League] because I firmly believe in raising the MBL cap.” By doing so, it would give more small business owners opportunities to offer more jobs at the very least, she said.

Being able to provide small businesses with the capital they need to create jobs and lift up the nation's economy should supersede any turf banks are trying to guard, said TCUL Chief Advocacy Officer Buddy Gill.

“The key thing is this should be about small businesses. Period. The best chance to pass this [12.25% MBL cap hike] is to make sure small businesses are out front telling their stories,” Gill said.

Credit unions should not fall into the trap of making the issue about them against banks, Gill urged. The industry's track record speaks for itself with fewer charge-offs and the growing number of stories about small business owners being turned down by banks for refinancing or extended lines of credit. Gill said the Texas league, like many others, has been out front encouraging small businesses to speak to their legislators.

Sen. John Cornyn (R-Texas) recently stopped by the Hermanns' bagel shop. “So much of what we've heard in the recent financial crisis is that the big banks and Wall Street seem to be getting help, but what about folks at the main street level?” Cornyn asked. “We appreciate the good work of Randolph-Brooks Federal Credit Union in working with the SBA and working with small businesses like the Bagel Factory to make [access to credit] possible.”

RBFCU is doing its part to make that happen. The cooperative was recognized by the SBA as 2009's top CU 7(a) loan lender. As of March 31, it had $21.8 million in SBA loans and $100 million in commercial loans, which included a mixture of business loans, Sekula said. The CU has been offering business loans for nearly nine years, and over the last five years, the program has grown so much nine employees have been hired to keep up with the demand. With layoffs and banks reluctant to lend, there has been a rise in loan requests. Dentists and doctors are among those seeking refinancing on their building spaces.

“We really don't have to advertise, we have so many people coming in,” Sekula said. “In these economic times, people aren't looking to borrow new money. They're restructuring terms they already have. Banks are fearful. Loans are being called due, lines of credit are being reduced. They're coming to us to refinance.”

Meanwhile, Suzanne and John had a recent talk about moving the bulk of their accounts over to RBFCU. When the couple opened their first bagel shop in Augusta in 2000, the economy was stronger and they didn't have a problem getting a loan from Wachovia Bank at the time. Today, she runs lean and mean. The menu is one-third of what it was at her Augusta shop. Suzanne opts for a less expensive variety of onion and comes up with creative ways to incorporate cheeses and meats into the shop's bagels and sandwiches. She remains puzzled by the banking industry's efforts to keep the MBL cap where it is.

“It doesn't make any sense. My question is if you don't lend to me, why are you trying to stop others from lending to me.”

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