GE Capital is targeting exactly the kinds of companies that President Obama accuses banks of neglecting.
The financing arm of General Electric Co., which historically has focused on lending to large companies, is courting bread makers, lawnmower manufacturers and other small businesses these days. An aggressive multimedia marketing campaign that launched in August features some of its success stories.
With a $15 billion capital infusion from its parent company, GE Capital is among several nonbank lenders cranking up loan volume for small and midsize firms as banks, under regulatory pressure to preserve capital, scale back.
In a December webcast for investors, Mike Neal, GE Capital's chief executive, pointed out that small-business lending by traditional banks fell 4.2 percent in 2009, while at nonbank lenders it rose 5.1 percent. "Nonbank financial institutions have been the largest private-sector source of credit creation in the United States," he says.
That's the message in one television ad, called "American Renewal," which shows images of manufacturing, shipping, retail and airline operations while a voiceover touts GE Capital's role in providing these businesses the financing needed "to help get our economy back on track."
Other ads use real-life customers touting how GE Capital understands what small businesses need. One print ad showcases Hudson Bread, a New York City bakery that used financing from GE Capital to expand into a baked-goods supplier for hotels and restaurants. Another shows how GE Capital has helped comparatively large and well-known companies grow, among them Southeast furniture retailer Rooms to Go.
A series of online ads, dubbed "GE Success Stories," includes one featuring some Jack-in-the-Box franchisees. They flip burgers on a backyard grill beside a road as customers drive up to place orders. Then the ad switches to an image of the business idea that brought us modern fast food: the drive-thru. In a separate online testimonial that the lender has on its Web site, those same entrepreneurs explain why they chose GE Capital - not a bank - to finance an expansion in Texas.
Digital shop Syrup, with headquarters in New York and Stockholm, created the online component. New York ad agency BBDO handled print and TV ads, which have run in Chicago, Dallas, New York, Los Angeles and Washington and some European markets. GE Capital is considering expanding the campaign in 2010. The company would not disclose spending totals for the blitz.
GE Capital says its level of lending to small and midsize businesses has been steady since the ads began in August.
Branding expert Robert Passikoff lauds GE Capital for the "right campaign at the right time," saying it coincides with business owners' growing frustration with traditional lenders. "It allows GE to expand its brand at a time when small businesses feel like traditional banks have turned their backs on them," says Passikoff, president of the market research firm Brand Keys in New York.
In some ways, GE Capital didn't have much choice but to ramp up lending to small businesses. Demand from larger ones has slowed considerably since the onset of the financial crisis, and the company has been hit hard by defaults in commercial real estate loans. So severe were its problems that its parent company lost its triple-A credit rating and had to lean on the federal government to guarantee billions in unsecured debt.
In his presentation to investors, Neal projected GE Capital would show a 10 percent increase in lending in the second half of 2009, compared to the first six months. Through the first three quarters of the year, GE Capital had provided roughly $31 billion in loans to 1.2 million small and midsize businesses, which it defines as having annual revenue of $50 million or less. At the end of September, 20 percent of its commercial loan portfolio consisted of loans under $1 million.
While it's hard to predict demand going forward, GE Capital, with its parent company's economic telescope, may be in a better position than many lenders to see where growth opportunities are.
"We are providing financing in a number of markets and industries we know very well from our industrial businesses, including aviation, transportation, energy and healthcare," says GE Capital spokesman Russell Wilkerson.
The ads are meant to keep the momentum going. "The campaign's goal has been to show our commitment to the market and to show how we are providing lending that supports jobs and local economies," Wilkerson says. "Our message is simple: We are lending, and we can help you."