Brad Shimp

Monday, 22 July 2002 09:35

The truth about government loans

There are many misconceptions about government loans.

Some seeking financing avoid government loan programs, assuming the paperwork and restrictions are insurmountable. Others believe grants -- free money -- for small businesses are plentiful and easy to access.

Here are the facts on nontraditional financing sources like government loans, focusing on the five most common misconceptions we hear at Columbus Countywide Development Corp.

1. I don't want to deal with the paperwork the government wants. I don't have the time or staff to put this information together.

Certified development companies like Columbus Countywide are authorized and screened by the U.S. Small Business Administration. Their staffs are trained to help you gather the information you'll need for your loan application and keep the process as simple and quick as possible. Columbus Countywide staff will visit your business and help you one on one. It also partners with other organizations that help in this endeavor, for free.

2. It takes too long to get a government loan.

Generally, loans for real estate can be approved internally and by the SBA within 30 to 60 days. Most other Columbus Countywide loans have a turnaround of less than 30 days. MicroLoans can be processed and closed in less than two weeks.

3. There are too many out-of-pocket fees.

Most fees are included in the interest rate of the loan or can be financed, so there is little to no out-of-pocket expense. The savings and benefits to the business owner are a fixed interest rate, a typical 10 percent down payment and long terms, which keep monthly payments affordable.

4. The job creation requirements are too strict.

Some programs require the business create one job per $35,000 of the government's portion of the loan amount. This can be confusing. If your total project was $1 million, the SBA 504 financed portion would be 40 percent, or approximately $400,000. Dividing that $400,000 by $35,000 works out to about 12 jobs. These jobs must be created during the first two years of the loan, not immediately. In addition, retaining jobs can count toward this goal. Six of Columbus Countywide's government loans have no job creation requirements.

5. I don't need a government loan. The bank will lend me money.

Business owners use government financing when one of the following factors makes it a good decision for their business:

  • They need a 10 percent down payment program. Cash must be left available for working capital. A greater requirement would seriously strap the business and its chances for growth. Banks usually need more than 10 percent down.

  • A predictable payment with a fixed interest rate is crucial. To plan one- to five-year growth, many need a consistent loan payment for cash flow projections. Bank interest rates are usually variable.

  • A long term to keep the payment affordable is a must. Columbus Countywide has government programs that do real estate financing for 20 to 25 years and equipment financing for 10 years.

  • Government loan programs do not have to be full of red tape. Many misconceptions can be easily cleared up by a loan professional.
How to reach: Columbus Countywide, www.ccdcorp.org, 645-6439 or toll free (888) 756-2232

Brad Shimp is executive director of Columbus Countywide Development Corp.

The top five

Here's a quick look at the top loan programs offered in Central Ohio by Columbus Countywide. This nonprofit organization is authorized by the U.S. Small Business Administration to provide assistance in getting government loans.

SBA 504

Type: Direct loan

Use: Financing for land, buildings or equipment

Owner investment: Typically 10 percent

Term: 10 years on equipment, 20 years on real estate

Interest rate: Fixed

Ohio 166

Type: Direct loan for manufacturing, wholesaling and distributing businesses

Use: Financing for land, buildings and equipment

Owner investment: Typically 10 percent

Term: Maximum of 15 years

Interest Rate: Fixed, two-thirds of prime rate

Pre-Qualified Loan Guaranty

Type: "Pre-Guaranty" from the SBA on loans to businesses owned 51 percent or more by women, veterans or minorities, or businesses located in rural areas or primarily involved in exporting

Use: Working capital, refinancing debt, equipment, inventory and real estate

Owner investment: Typically 10 percent

Term: Up to 25 years

Interest rate: Set by lender, within SBA set limits

Columbus Growth Fund

Type: Direct loan

Use: Working capital and equipment

Owner investment: Typically 10 percent

Term: Maximum of five years, amortized up to 10 years

Interest rate: At market, based on the level of risk

MicroLoans

Type: Direct loan

Use: Equipment, working capital and inventory

Owner investment: Typically 10 percent

Term: Maximum of six years, no minimum term

Interest rate: Fixed, maximum 11.6 percent

Monday, 22 July 2002 09:43

Loan opportunities abound

Health care has always played a large role in our economy, and as the nation’s 78 million baby boomers move into their 50s and beyond, the health care industry is full of opportunities for small business owners.

Central Ohio’s only nonprofit small business lender, Columbus Countywide Development Corporation (CCDC), the area’s largest SBA lender, offers several financing solutions to help small business owners with growing companies.

With a Small Business Administration 504 loan through CCDC, Michael Bourland, founder of HealthServ Inc., Columbus, bought a building for his growing medical administrative service company with a 10 percent down payment. The company, which provides administrative services for physician groups and mid-sized hospitals, had outgrown its space and worked with Fifth Third Bank to secure its loan.

Through the SBA 504 loan program, healthy, growing small businesses can get financing for land, buildings, machinery or equipment. The loans typically require a 10 percent down payment, with a local bank financing 50 percent of the loan and CCDC financing the remaining 40 percent.

The Ohio 166 loan program also requires a 10 percent down payment. Health Care Logistics of Circleville used its Ohio 166 loan to help purchase and renovate a former Coca-Cola bottling operation warehouse and office. Gary and Connie Sharpe, owners of the supplier of specialty medical products for the health care industry, worked with Park National Bank to buy warehousing equipment and the actual space.

As with the SBA 504 loan, the Ohio 166 Loan Program requires local bank participation. CCDC uses state dollars to finance the remaining 40 percent of the loan focusing primarily on helping manufacturing businesses grow by financing land, buildings, machinery and equipment.

Another option for qualifying business owners is the SBA’s Pre-Qualified Loan Program. CCDC helps businesses acquire a loan guarantee from the SBA and owners can use this guarantee to obtain a traditional bank loan. This program targets rural, women-, minority- and veteran-owned businesses and exporters, and helps businesses that lack collateral or a lengthy credit history finance a loan with terms and rates that work for them. Owners put up a 10 to 30 percent down payment, depending on their bank’s requirements.

Additional financing programs through CCDC include its MicroLoan and Child Day Care MicroLoan programs. CCDC also manages the Columbus Growth Fund, a loan program for businesses in Columbus looking for working capital to expand.

CCDC also offers seminars on business plan development and holds ongoing business management classes for MicroLoan borrowers and other interested small business owners.

Since 1981, CCDC has helped more than 1,100 small businesses obtain financing and approved more than $190 million in loans, which have created more than 11,000 jobs and stimulated more than $500 million in new investments in the 13 counties it serves. For details on CCDC’s loan programs, call (614) 645-6171 in Franklin County, toll free at (888) 756-2232 or visit its Web site at www.ccdcorp.org.

Brad Shimp is acting director of Columbus Countywide Development Corporation.

Monday, 22 July 2002 09:42

Hats off to small business

For the past 37 years, the U.S. president has declared a Small Business Week to celebrate the accomplishments of the estimated 25 million small businesses in the United States.

These businesses collectively employ more than half of the country’s private work force, create two of every three new jobs and generate many of America’s innovations.

Columbus Countywide Development Corp. is proud to participate in Small Business Week activities, held this year from May 21 to May 27. The week culminates in an awards ceremony recognizing small businesses that have succeeded at the local, state and national levels.

This success is attributed to small business owners who are rich in ideas, but not necessarily cash. That’s where Columbus Countywide comes in, which many of these entrepreneurs turn to for financing.

Dana Bromberg, the 1998 Ohio Young Entrepreneur of the Year and president of CinemAd Media, used low-cost financing through a Small Business Administration 504 loan to purchase a building at East Town and Lester streets. The building quadrupled the company’s space, allowing Bromberg to add staff, with only a 10 percent down payment. He started the business in 1991 while at The Ohio State University.

CinemAd sells and designs slide shows shown on movie theater screens. Before each feature movie presentation, a sequence of trivia questions, movie related slides and colorful ads are projected. Each question is followed by advertisements. The company’s 200 customers include theaters, restaurants, retailers, professionals and other service providers.

CinemAd’s movie theater business includes 800 screens, representing 30 theater chains in Central, Eastern and Northern Ohio, as well as screens in Dayton, Cincinnati, Canton and Richmond, Ind.

Through the SBA 504 loan program, healthy, growing, small businesses can get financing for land, buildings, machinery or equipment. CinemAd worked with KeyBank to secure its loan. SBA 504 loans typically require a 10 percent down payment, with a local bank financing 50 percent of the total loan amount and Columbus Countywide the remaining 40 percent.

Small business owners can also use SBA 504 loans to buy property. The 1998 Ohio Minority Business Advocate of the Year, Dwight E. Smith, worked with Huntington National Bank for his SBA 504 loan to buy land and construct a building for his growing company, Sophisticated Systems Inc.

With locations in Detroit and Columbus, Sophisticated Systems provides computer consulting and sales to private corporations and government agencies and has expanded to two locations since its Columbus founding in 1990. This growth led to the need to move from 4,500 square feet of leased space to 10,000 square feet in its new, company-owned offices.

Columbus Countywide also offers small businesses seminars on business plan development and holds ongoing business management classes for MicroLoan borrowers and others who are interested.

Since 1981, Columbus Countywide has helped more than 1,100 small businesses obtain financing. It has approved more than $190 million in loans, which have created more than 11,000 jobs and stimulated more than $500 million in new investments in the 13 counties it serves.

Small in name only, small businesses contribute greatly to our economy and our society. Take time to recognize them during Small Business Week.

For details on Columbus Countywide’s loan programs, visit www.ccdcorp.org or call 645-6171 in Franklin County or (888) 756-2232, toll free, from elsewhere.

Brad Shimp is acting director of Columbus Countywide Development Corp.

Monday, 22 July 2002 09:36

No small opportunity

Need to expand?

Is it time to build or buy your own building?

Need a low down payment?

Is a fixed interest rate important to you?

Looking for a 20-year term on repayment?

Join Anthony Thomas Candy Co., the Columbus Athenaeum and hundreds of other small businesses in the Central Ohio area which financed their buildings through the U.S. Small Business Administration's 504 loan program. This program is designed for healthy, growing small businesses and offers:

  • A 10 percent down payment. You keep cash in your business.

  • A long term repayment schedule of 20 years. You make lower payments.

  • Fixed rates. You get predictable, stable payments.

The process begins when the business contacts a certified development company, like Columbus Countywide in Columbus, to review its project. The U.S. Small Business Administration has certified these nonprofit organizations, which assist businesses in compiling the necessary financial and business records.

Their job is to make the process as fast and easy as possible. Donato's Pizza and Functional Furnishings both worked with their local SBA 504 lender, Columbus Countywide, to get their loans.

The SBA 504 loan program usually requires a 10 percent down payment by the business. Columbus Countywide finances 40 percent and a bank finances the balance. Gibby's Grandview and Hugs N Hearts Learning Center immediately saw the benefit of this low down payment requirement, compared to the average 20 to 40 percent required by most banks.

The SBA 504 loan program can also finance professional fees incurred with new building construction, all closing costs and up to $2,500 in legal fees. This lets small businesses have ready cash available for working capital needs.

Business can also benefit from a fixed, competitive interest rate with the SBA 504 loan. In fact, the SBA 504 rate has been dropping in recent months and was recently at 9.05 percent. Jolly Pirate Donuts found that with interest rate volatility, having a fixed, predictable rate for the life of the loan was a smart business move. It can help businesses keep cash available for future growth and expansion and cushion against inflation.

Katzinger's Deli and Linden Medical Center have taken advantage of the program's long 20-year loan term. This keeps a business's monthly debt payments low and cash available for working capital needs. Banks usually ask for a 15-year term on real estate. A 504 loan makes your cash flow look better.

SBA 504 loans generally are approved and turned around within 30 days, and in some cases, in less than a week. Many business owners are not aware of this quick processing and perceive any government financing program as long and tedious. Another lesser known fact is that you can use the SBA 504 more than once and can combine financing from this program with other city, state and federal loans. BobCat of Columbus, National Sign Systems Inc. and Impulse Wear took advantage of SBA 504 financing for their real estate needs and the Ohio 166 loan program for their equipment.

The SBA 504 program also finances equipment with a useful life of 10 years or more. Ron's Express Car Wash found this an added benefit to the program.

Nfocus and Otie's Towne Pub were ready to move from renting to owning their own buildings and found the rate, down payment and long term they needed through Columbus Countywide.

In addition to the SBA 504 program, certified development companies like Columbus Countywide offer loans specifically for small equipment, working capital, inventory and refinancing some debt. These programs range in amounts from $500 to $250,000. Some specialize in start-up or high-risk businesses; others are for rural or women-, minority- or veteran-owned companies and exporters. Businesses including X Design, Terra Cotta and HTG Sales have financed their growth with these funds.

Since 1981, Columbus Countywide has helped more than 1,100 small businesses obtain financing in 13 central Ohio counties. SARCOM, Three C Body Shop and Universal Fitness and Leisure are good examples.

Columbus Countywide has approved more than $190 million in loans creating more than 11,000 jobs. Brad Shimp is executive director of Columbus Countywide Development Corp.

How to reach: Columbus Countywide Development Corp., www.ccdcorp.org, 645-6171, (888) 756-2232

Monday, 22 July 2002 09:44

Money to grow on

One-stop shopping has truly arrived. So much so that the ability to offer a full spectrum of products and services for business and personal use is often what sets one small business apart from the rest.

In order for small businesses to be competitive and fulfill this now-common consumer demand, they often need to expand quickly. Shige Moroi, owner of M-Corporations, knows all about that. His three affiliate companies — M-Telecommunications, M-Engineering and M-Retail — offered complementary services to clients, but were located in different areas of Columbus.

To make his company more of a one-stop shop, Moroi set out to buy facilities that could house all three affiliates in one area. To maintain cash flow, Moroi wanted to secure financing with a low down payment. He did it with help from his bank and the nonprofit Columbus Countywide Development Corp.

Using a U.S. Small Business Administration 504 Loan and a 10 percent down payment, Moroi purchased two adjacent buildings to consolidate M-Corporations’ operations in a central location. Huntington National Bank financed 50 percent of the loan, as is typical with the SBA 504 program and Columbus Countywide financed the remaining 40 percent. The SBA 504 loan program offers loans to healthy, growing small businesses for land, buildings, machinery or equipment.

Other lending programs offered by Columbus Countywide include:

  • Ohio 166 loans through the Ohio Department of Development. Like SBA 504 loans, the Ohio 166 Loan Program requires a 10 percent down payment. Columbus Countywide uses state dollars to finance 40 percent of the loan, while a local bank chips in the rest. Ohio 166 loans focus primarily on helping manufacturing businesses grow by financing land, buildings, machinery and equipment.

  • SBA Pre-Qualified Loans. Under this program, Columbus Countywide helps businesses acquire a loan guarantee from the SBA as an initial step in the financing process. The owners can then use this guarantee to obtain a traditional bank loan. This program targets rural, women-, minority- and veteran-owned businesses and exporters; and helps businesses that lack collateral or a lengthy credit history finance a loan. Owners put up a down payment of between 10 percent and 30 percent, depending on their bank’s requirements.

  • Central Ohio MicroLoans. This program offers financing for “pre-bankable businesses,” those that are too small or too new to secure a traditional bank loan. These loans can be used for equipment purchases and working capital such as inventory, receivables and operating funds. All borrowers must write and submit a business plan to be considered for a MicroLoan.

  • The Columbus Growth Fund. This loan program is specifically designed for existing businesses in the city needing financing to expand.

Columbus Countywide also offers seminars on business plan development. It holds ongoing business management classes for MicroLoan borrowers and other interested small business owners to ensure sound fiscal management.

Since 1981, Columbus Countywide has helped more than 600 small businesses obtain financing. It has approved more than $160 million in loans, which have created more than 9,000 jobs and stimulated more than $350 million in new investments in the 13 counties it serves.

For details on Columbus Countywide’s loan programs visit www.ccdcorp.org or call 645-6171 in Franklin County or (888) 756-2232, toll-free, from elsewhere.

Brad Shimp is interim director of Columbus Countywide Development Corp.

Monday, 22 July 2002 09:34

The holiday cash crunch

For many small businesses, the holidays are the busiest time of the year.

Up to 25 percent of annual revenue for small businesses can come during the weeks between Thanksgiving and New Year's. Some have contracts, but need cash to increase inventory for the holiday season. Others need cash to buy raw materials to fill holiday orders.

Marvin Swain Jr., president of My Mama's Sweet Potato Pie Co., has felt the year-end financial pinch before. In fall 1999, with a contract with a national grocery chain, My Mama's Sweet Potato Pie had an order for 20,000 pies with delivery during the holiday season.

While Swain -- who founded the company in 1986 with $50 and his mother's all-natural recipe for sweet potato pie -- had his first big-league order, he did not have the working capital to fill it. He needed a source of financing to help with cash flow.

His solution? Columbus Countywide Development Corp.'s MicroLoan program, which financed a small business working capital loan.

The MicroLoan program offers financing for "pre-bankable" businesses -- those too small or too new to secure a traditional bank loan. These loans can be used for equipment and working capital like inventory, receivables and operating capital.

All borrowers must write and submit a business plan to be considered for a MicroLoan. The staff at Columbus Countywide helped Swain update his business plan, which was originally written in 1998 with Columbus Countywide's assistance when he secured his first MicroLoan.

D Searcy, owner of Terra Cotta, a pottery and garden-themed accessories store in Clintonville, ran into her financial crunch after the holiday season a few years ago. She found help not once, but twice, through Columbus Countywide.

In early 1997, Searcy moved her store to a bigger space. With the new location came advantages, such as larger windows for displays and on-site storage of inventory. However, it also brought challenges, since improvements were needed for the space, which had previously been a carpet store.

That's when Searcy, a previous MicroLoan borrower, went back to Columbus Countywide and worked with its staff to acquire a loan guaranty from the SBA. She used this guaranty to shop around at banks until she found one willing to finance her loan at the rate and terms she needed.

The SBA Pre-Qualified Loan Guaranty program Searcy used specifically targets rural, women-, minority- and veteran-owned businesses and exporters. Owners put up 10 percent to 30 percent as a down payment, depending on their bank's requirements.

For Searcy, the money went toward working capital, inventory, store improvements and debt consolidation.

Retailers Anthony Thomas Candy Co. in Columbus and Gooseberry Patch in Delaware found another program through Columbus Countywide to buy new buildings to house offices and inventory for the holiday selling seasons. They took advantage of the SBA 504 loan program, which helps business owners finance real estate and new buildings.

The program requires a 10 percent down payment by the business owner, with the bank financing 50 percent and Columbus Countywide the other 40 percent. In addition to the low down payment, the SBA 504 loan program comes with a fixed interest rate and a 20-year term.

Since 1981, Columbus Countywide has helped more than 1,100 small businesses obtain financing. It has approved more than $190 million in loans, which have created more than 11,000 jobs and stimulated more than $500 million in new investments in the 13 counties it serves.

For details on Columbus Countywide's loan programs, visit www.ccdcorp.org or call 645-6171 in Franklin County, or toll free at (888) 756-2232 from elsewhere. Brad Shimp is executive director of Columbus Countywide Development Corp.