Small fish in a big pond – Lending group lures beginning businesses to help during early stages

COEUR d’ALENE — Experience and hard work are essential ingredients for the success of a new business, but without necessary funding, the chances for that success are slim at best.

Since 1953, when the Small Business Administration was officially established, nearly 20 million small businesses operators have turned to the agency for help.

By RICK THOMAS
Staff writer

http://www.cdapress.com/articles/2004/08/28/business/bus01.txt

"I chose the SBA because it has an attractive program with lower down payments and good terms," said Brent Christian, owner with wife Michelle of Tobler Marina in Hayden. "I had the experience, but not the money."

The SBA has a variety of loan and training programs to fit the needs of small business.

The basic 7(a) loan program helps qualified small businesses obtain financing when they might not be eligible for business loans through normal lending channels. It is also the agency’s most flexible business loan program, since financing under this program can be guaranteed for a variety of general business purposes.

Loan proceeds can be used for most sound business purposes, including working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction), leasehold improvements, and debt refinancing. Loan maturity is up to 10 years for working capital and generally up to 25 years for fixed assets.

Customers are startup and existing small businesses, with loans delivered through commercial lending institutions.

Bob Beck, manager of small business lending at Mountain West Bank, is the region’s top SBA expert and says it’s the key to the success of many.

Hatch Mueller, a landscape architecture firm in Coeur d’Alene, got a 100 percent loan-to-value to remodel a downtown building through the bank.

"There’s no way they could have gotten that without the SBA," said Beck.

SBA offers variations of the basic program to accommodate targeted needs.

The Certified Development Company (CDC), a 504 loan program, provides long-term, fixed-rate financing to small businesses to acquire real estate or machinery or equipment for expansion or modernization. Typically a 504 project includes a loan secured from a private-sector lender with a senior lien, a loan secured from a CDC (funded by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the total cost, and a contribution of at least 10 percent equity from the borrower. The maximum SBA debenture generally is $1 million (and up to $1.3 million in some cases).

Customers are small businesses requiring "brick and mortar" financing.

The loans are delivered through certified development companies. Those are private, nonprofit corporations set up to contribute to the economic development of their communities or regions. In North Idaho, that role is filled by the Panhandle Area Council.

In addition, the SBA loan prequalification program allows applicants to have their loan applications for $250,000 or less analyzed and potentially sanctioned by the SBA before they are taken to lenders for consideration.

***********

Business beginnings

Editor’s Note: This is the second of a two-part look at how the U.S. Small Business Administration helps prospective business owners with the difficult process of starting and succeeding in a wide range of ventures.

COEUR d’ALENE — All the good intentions, all the great ideas, innovation and ingenuity, all the optimism and planning in the world will get most people nowhere in the business world without one other major ingredient — cash.

By RICK THOMAS
Staff writer

http://www.cdapress.com/articles/2004/08/29/business/bus01.txt

Many new startups need only that component to get them rolling down the road to success, and the U.S. Small Business Administration is a major source of business capital for small businesses across the country, including about 500 a year funded through the Spokane regional office.

In Saturday’s Press was an overview of the basic SBA programs. Today, six businessmen rolling down that highway discuss how the loan guarantee program jump-started their dreams.

•••

In 1995, Brent and Michelle Christian used an SBA loan to buy Tobler Marina, with a waterfront operation on Hayden Lake and another on U.S. 95 completed three years ago.

"The lake was a destination location," said Brent Christian. "In the winter there’s no traffic."

He studied business management classes at the University of Wyoming and attended Spader Business Management School. He worked at Tobler under former owner Richard Penn from 1991 to 1994.

Michelle worked as a bank teller until the purchase of Tobler Marina. She now does bookkeeping for Tobler as well as caring for their two daughters.

They are authorized dealers of Nautiques, Chaparral, Crestliner, Alumaweld, and Glastron boat manufacturers.

With the ever-increasing traffic on the highway, sales have more than tripled from less than $3 million per year to close to $9 million, with sales of 300 boats a year.

Without help from the SBA, problems getting the new showroom open might have left them dead in the water.

As they neared their opening day, they discovered a major requirement that they hadn’t been advised of before — a requirement to install their own sprinkler system.

Since there was no major water line to the site, they had to install an underground, pressurized cistern to service the system, said Bob Beck, manager of small business lending at Mountain West Bank. Beck is the area’s leading SBA expert, and the bank the area’s top SBA lender.

"That was a $45,000 ‘oops,’" said Brent. "It delayed our opening one whole season."

With Beck’s help, the Christians cashed in on the SBA’s Community Adjustment and Investment Program. CAIP was established to assist U.S. companies that are doing business in areas of the country that have been negatively affected by the North American Free Trade Agreement. Funds allow for the payment of fees on eligible loans.

A job-creation requirement allows for $70,000 in SBA guarantees under the 7(a) basic loan program, and $50,000 under the Certified Development Company (CDC), a 504 loan program that partners with, in North Idaho, the Panhandle Area Council.

That program saved the Christians close to $25,000.

"It almost paid for the sprinkler system," said Brent.

•••

Veterinarian Bruce King ran into a similar problem when he began construction on his Lakewood Animal Hospital on Hanley Avenue.

Construction delays were brought on by conflicts with inspectors — "I was in kind of a Catch 22," said King. "One wouldn’t sign off without the other signing off first."

Even early in the process, he discovered the site’s elevation was too low, and fill had to be brought in — lots of fill — $25,000 worth.

He, too, made use of CAIP, thanks to Beck’s expertise.

"Bob was the only one who knew anything about it," said King. "It saved me $25,000. That was the fill."

King also availed himself of the SBA-administered counseling and training program at the Small Business Development Center in the North Idaho College Workforce Training Center in Post Falls.

There, counselor John Lind helped him run spread sheets and prepare a business plan.

On a visit to the clinic with SBA officials and Beck last week, King showed a comparison of his projections and actual business volume. In each month, the numbers were within a few hundred dollars of each other.

The loan allowed King to enhance his bottom line by offering boarding and other services. He continues to add complementary features to the clinic, including recently planting $2,500 worth of Alpine birch trees.

"They should have been dogwood," Gil Acevedo, a loan specialist for the SBA in Spokane, suggested.

"I wouldn’t have been able to do this without the SBA," said King. "I would have to had to go in to a strip mall, lease my equipment and get two years’ experience."

•••

Tom Zenahlik, who opened Odyssey Sports Inc. in Hayden in 2002, had plenty of education and experience, but came to the SBA for financial help because of the low interest rates when he opened the golf cart sales and service facility just off U.S. 95 and Hayden Avenue.

Acevedo asked Zenahlik if the loan was difficult to get.

"Absolutely not," said Zenahlik. "If the paperwork is done right, there should be no problem."

The SBA loan includes operating capital under a revolving line of credit, allowing Zenahlik to exercise his entrepreneurial imagination, picking up additional inventory when he sees a hot deal.

He, too, praises Beck for his understanding of the SBA loan process.

Zenahlik’s loan had originally been approved by another bank.

"At the eleventh hour the president of the bank called and said I’d been turned down for the land and building," Zenahlik said. "I was despondent."

A friend referred him to Beck, who said he couldn’t understand the reasoning, with property values escalating so rapidly in the region.

"At four o’clock in the afternoon — the other thing had just transpired a few hours before — I took it to Bob," said Zenahlik. "He was just ready to leave town, but he took a look. When he came back on Monday, he sent it in. In 10 days the loan was approved."

Since opening, sales have increased by more than double what he was doing from his home-based business.

•••

In downtown Coeur d’Alene, Jonathan Mueller and Dell Hatch combined an SBA loan and a partnership with the Lake City Development Corp. urban development agency to allow the renovation of an old building on Sherman Avenue.

Hatch Mueller, a landscape architecture firm, got aid from the LCDC with facade work, landscaping and demolition.

With help from Beck, who, said Mueller, "came very well recommended," the company worked hard to get the most for their money.

"We were surprised at what we were able to get," said Mueller. "We were fortunate to have them as part of our team."

Brick accents, a "pocket park" near the entry and a restored cedar ceiling add to the atmosphere. So does a cost-effective red-tinted concrete floor and matching wall in a kitchen/multipurpose area.

"You have a warm atmosphere here," said Sharon Russell, entrepreneurial development specialist with SBA as she toured the office, which opened in April.

Mueller said there was plenty of creativity in the design and the business plan for their new offices.

"It wasn’t a slam dunk, cookie-cutter plan," he said. "We stuck with it, and the SBA stuck with us."

•••

Jerry Goggins took advantage of the 504 Community Development Company program to buy Brix restaurant on Sherman Avenue in downtown Coeur d’Alene.

Under that program, the SBA provides half the funds, with 40 percent offered through the Panhandle Area Council and 10 percent from the borrower.

Goggins took the staff from 16 when he took over last spring to between 65-70 during the summer, and by marketing the restaurant’s banquet capacity expects to keep many on after the tourist season ends and some help returns to school.

It’s his second SBA loan, having used a 7(a) loan to purchase the Ocean Blue car wash on the north side of town.

He said the application process for the 504 program is only slightly more complicated than the basic SBA loan.

"The terms are advantageous to the way we want to do business," Goggins said.

•••

Jeff and Carol Kemp opened Graffiti Sound Solutions in Post Falls early in 2002, filling a niche for high-end installation of audio, video, security, navigation and other equipment from a retro-designed building near the Hot Rod Cafe.

The former Post Falls and Spokane resident returned from the Bay area after being part of the downsizing of Hewlett Packard after its merger with Compaq.

"Idaho is much more small-business friendly," said Jeff Kemp. "It made my career change — life change — easier."

Kemp focuses on high-quality installations, designed to look like they came from the factory.

"It sounds corny," he said. "We don’t have installers, we have integrators."

With the growth of high-end homes in the region, he’s now moving in the direction of that market, with many jobs in five figures, some nearing six.

Entire systems can be controlled with a single remote unit, he said.

"Guys like remote control," said Acevedo. "If the washing machine came with remote control, I’d probably do the laundry."

Kemp said there were many sleepless nights during construction, when the budget was exceeded.

When Beck advised him the SBA would pick up some of the fees under CAIP, some stress was relieved.

"The SBA for me was like a savior," he said. "It allows me to grow my business, and have operating capital."