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

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

The 3,300-square foot shop, which opened last November, hasalready exceeded its annual revenue projections, employs 14 andbakes 100 dozen bagels each day, Hermann said. The Bagel Factorywas able to secure contracts with a major chain hotel and aprominent local catering service. Discussions are underway to opensatellite offices where unbaked bagels are delivered to sites sothat 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 locationsright now” for a second shop.

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

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

The couple also had a track record unlike some buddingentrepreneurs making their entry into the restaurant business. Theyowned and operated a bagel shop in Augusta, Ga., along with threesmall coffee houses. After Suzanne and John had their second childin 2000, they sold the Georgia shop. John, a military man,re-enlisted and the family moved to San Antonio in 2005. TheHermanns had no intentions of opening a bagel shop in their newhometown, but after former customers who had coincidentally movedfrom Augusta to San Antonio started asking if they were planning toopen up another shop, the couple decided to get a business plantogether.

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

“I always thought credit unions were attached to [military]bases, and you had to be a member,” she said. “I called that sameday at 2:00 in the afternoon. I got Kenan Pankau's voice mail. Itold 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 sosure that they wouldn't have any problems being approved, they hadalready found a prime location for the bagel shop. Mark Sekula,senior vice president of business services at RBFCU, remembers howorganized Suzanne was with the paperwork coupled with therestaurant experience she and her husband brought to the table.

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

Within a day of contacting Pankau, the Hermanns were approvedfor a $380,000 SBA Patriot Express loan, Suzanne said. Launched inJune 2007, the loans of up to $500,000 are available to militarypersonnel and their spouses for start-ups, expansion and equipmentpurchases. They qualify for SBA's maximum guaranty of up to 85% forloans of $150,000 or less and up to 75% for loans over $150,000 andup to $500,000. For loans above $350,000, lenders are required totake all available collateral.

Suzanne said she actually needed $450,000, but thanks to someextra investments, she was able to make up the difference. Her onecomplaint she is a depreciation requirement on equipment that comeswith the loan. The couple had spent $282,000 on brand new equipmentfor the bagel shop, but because of the guideline, “it depreciatedbefore it walked through the door.” She wondered if the PatriotExpress loan was available up to $500,000 and she was still puttingdown 20%, “Why couldn't I get the full amount?” Regarding thedepreciation, Sekula said lenders have to determnie the liquidationvalue of collateral so that the SBA knows what is considered theunsecured portion of the loan.

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

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

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

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

Being able to provide small businesses with the capital theyneed to create jobs and lift up the nation's economy shouldsupersede any turf banks are trying to guard, said TCUL ChiefAdvocacy 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 suresmall businesses are out front telling their stories,” Gillsaid.

Credit unions should not fall into the trap of making the issueabout them against banks, Gill urged. The industry's track recordspeaks for itself with fewer charge-offs and the growing number ofstories about small business owners being turned down by banks forrefinancing or extended lines of credit. Gill said the Texasleague, like many others, has been out front encouraging smallbusinesses 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 financialcrisis is that the big banks and Wall Street seem to be gettinghelp, but what about folks at the main street level?” Cornyn asked.“We appreciate the good work of Randolph-Brooks Federal CreditUnion in working with the SBA and working with small businesseslike the Bagel Factory to make [access to credit] possible.”

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

“We really don't have to advertise, we have so many peoplecoming in,” Sekula said. “In these economic times, people aren'tlooking to borrow new money. They're restructuring terms theyalready have. Banks are fearful. Loans are being called due, linesof credit are being reduced. They're coming to us torefinance.”

Meanwhile, Suzanne and John had a recent talk about moving thebulk of their accounts over to RBFCU. When the couple opened theirfirst bagel shop in Augusta in 2000, the economy was stronger andthey didn't have a problem getting a loan from Wachovia Bank at thetime. Today, she runs lean and mean. The menu is one-third of whatit was at her Augusta shop. Suzanne opts for a less expensivevariety of onion and comes up with creative ways to incorporatecheeses and meats into the shop's bagels and sandwiches. Sheremains puzzled by the banking industry's efforts to keep the MBLcap where it is.

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

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