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Aug. 7--A week after cold-calling a large grocery chain, local soap maker Ben Busby-Collins struck a deal to supply dozens of its stores in the West with organic cleansers to sell.

Busby-Collins, the founding owner of Ballard Organics, convinced the grocer that consumer demand for soaps made without pesticides or solvents was on the rise. And as the only soap maker certified organic by the Washington state Department of Agriculture, he argued, his business was well-positioned to take advantage.

But there was just one problem: To fill the order, Busby-Collins needed a loan to buy new equipment and move to a place bigger than his tiny digs below the Cedars Restaurant in Seattle's University District.

Over the next two months, the 34-year-old entrepreneur was rejected by a half-dozen local banks on the grounds that he had a so-so credit score and not enough valuable property to pledge should he default.

It's a problem many small-business owners are facing as banks tighten lending standards after last year's financial-sector meltdown.

Although small businesses have long struggled to persuade banks to loan them money, even the most "bankable" among them are getting turned down, said Alice Davis, chief of staff for the Seattle-based nonprofit Community Capital Development, an approved lender for the Small Business Administration.

"Because banks are not lending, they're referring clients to us, and it's putting a strain on our resources," Davis said. "We're seeing people whose net worth may exceed $1 million, and they have collateral and good credit," the types of entrepreneurs previously served by banks, she said.

A recent survey of small-business owners for the University of Washington's Business and Economic Development Center proves her point: Nearly a quarter of respondents statewide, or 22 percent, said their credit needs were not being met in April, up from 18 percent last fall.

Roughly the same portion of respondents said their needs were being met, while more than half, or 55 percent, said they had no desire to borrow. That lack of interest suggests many business owners are waiting for an economic recovery to take hold before pursuing expansion plans, said William Bradford, a finance professor at UW's Foster School of Business.

"All of that is a clear signal that we're still in a recessionary environment," Bradford said. "When banks stop lending, that places restrictions on economic growth, so in a sense it fulfills any bad predictions."

Like many entrepreneurs, Busby-Collins relied on family largesse and credit cards to cover his startup costs, and he eventually owed more than $20,000. As long as he paid his monthly bills on time and kept his balances well below the maximum he was permitted to charge, he said, his credit score remained above 700 -- more than respectable.

But last year, credit-card companies began lowering the limits on his cards to a level that barely exceeded his balances, and his credit score dropped below 700. Bankers cited his "high balances on cards," Busby-Collins said. "But really, it was a factor of them lowering the limits on those cards."

Rather than give up, Busby-Collins turned to Seattle's Office of Economic Development for help.

In April, he began a four-month process with the city-backed Rainier Valley Community Development Fund, which approved him for a $250,000 loan at a 6 percent annual interest rate.

As part of the deal, Busby-Collins will move his soap-making operations to a 7,700-square-foot warehouse in Rainier Valley and create at least six jobs over five years. (His store will stay in its 800-square-foot spot near UW and soon offer soap-making classes.)

"We thought it was a no-brainer," said Martina Guilfoil, executive director of the Rainier Valley fund. "We looked at the strength of his cash flow and ability to repay the loan, and it was pretty impressive."

Busby-Collins founded his business in 2005 in a Ballard apartment and broke the $100,000 sales mark in 2007. Despite the recession, he said, sales more than doubled last year, mostly through about 40 wholesale accounts, including Whole Foods, Bartell Drugs and PCC Natural Markets.

With the loan, he was able to buy a pair of new double broilers that will increase his monthly liquid-soap production eightfold. Finally, he said, he can meet the Western grocer's private-label needs.

"I'm lucky they were willing to be patient," he said.

-- Amy Martinez

Tidbits

At the Macy's store in downtown Seattle, giant stuffed animals are out, and outerwear is in. Macy's has begun dropping F.A.O. Schwarz outlets in 260 stores nationwide after the venerable toy company was taken over in May by Toys R Us.

Under a year-old deal, F.A.O.'s plush toys adorned prime window space in Macy's downtown Seattle store at Third Avenue and Stewart Street. Now, that space is being converted to a North Face department, with clothing for men and women. It's expected to open by October, just in time to give the Columbia Sportswear store across from Macy's a run for its money this holiday season. -- AM

Former Tully's Coffee executive R.J. Selfridge has formed a company called ChefStack in Seattle that's bringing automatic pancake machines to U.S. convenience stores, coffee shops, hotels and airline lounges. The machines, which are already operating in Australia and Asian markets, sell for $3,500 and ChefStack says they pay for themselves in about four months. ChefStack recently closed $1 million in funding from local private investors. -- MA

Japanese dollar store Daiso has opened a temporary location at Uwajimaya Village in Seattle's International District, in space formerly occupied by Isami restaurant. The store is there through Labor Day weekend, after which Uwajimaya VP of real estate Ken Louie said he hopes to fill that space with another restaurant. Daiso also has stores at Westlake Center downtown, Alderwood mall in Lynnwood, and the Commons in Federal Way. It sells cosmetics, home decor, arts and crafts and other household products for less than $2. -- AM

The Auction of Washington Wines from Aug. 13 to 15 will include auctions and a picnic at Chateau Ste. Michelle in Woodinville, along with winemaker dinners. Single tickets to individual events priced from $150 to $500, part of it tax-deductible. Since it began in 1988, the Auction of Washington Wines has raised more than $21 million, much of it benefiting Seattle Children's hospital. Tickets are available at www.auctionofwashingtonwines.org. -- MA

Retail Report appears Fridays. Melissa Allison covers the food and beverage industry. She can be reached at 206-464-3312 or mallison@seattletimes.com. Amy Martinez covers goods, services and online retail. She can be reached at 206-464-2923 or amartinez@seattletimes.com

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