Ice cream entrepreneurs learn value of SBA program

It was only one of 356 loans the local office of the Small Business Administration was involved in over the past year.

But that SBA loan guarantee made all the difference in the world to Molly Richardson and the other owners of Delsa´s Ice Cream Parlour.

Michael Journee
The Idaho Statesman

“We weren´t prepared personally to come up with the kind of money we needed to buy this place,” said Richardson, who purchased the 40-year-old business with her husband, sister and brother-in-law in January. “I imagine lots of small businesses couldn´t have gotten on their feet without (the SBA).”

In fact, the number of entrepreneurs in Idaho and eastern Oregon taking advantage of the SBA´s loan guarantee programs, like Richardson and her partners, is growing, as is the size of the loans they´re getting.

More than $70 million in loans was meted out to the 356 businesses through two plans offered by the SBA´s Boise office in the past year. That´s a 33 percent jump from the previous year in dollars and a 27 percent increase in the number of businesses.

The largest loans in the past year, $1.3 million each, went to a new Holiday Inn Express in McCall, dairies in Oakly and Filer and the Idaho Falls Surgery Center.

The smallest loan, $8,000, went to Cory Lord Well Drilling in Almo.

The SBA said these loan-guarantees have allowed small businesses to create 1,582 jobs in Idaho and a portion of eastern Oregon.

Russ Butler, an SBA loan officer, said the low-interest rates draw small businesses to the SBA program. People are looking for “cheap money” to prepare their businesses for when the economy turns around, he said.

“The people we´re dealing with, things are going OK for them,” Butler said. “They see that it´s a great time as far as the cost of borrowing. This is a great time to do it.”

Richardson wouldn´t disclose the amount of the loan that allowed her and her partners to buy the company, which sells homemade ice cream wholesale and at Delsa´s Ice Cream Parlour at 7923 Ustick Road on the Boise´s Bench.

But she did say the loan — a traditional bank business loan from Washington Trust, most of which was guaranteed by the SBA — paid for the bulk of the property and a remodeling job, with a little left over for start-up expenses.

“It was a really good opportunity,” Richardson said, “and it was much simpler than I thought.”

The Delsa´s loan was the Richardsons´ second SBA-backed loan.

The first, which they obtained about two years ago, let them “get their feet wet” in the food business by buying The Lunchbox, a small mobile deli.

For each loan, a five-page business plan describing proposals for the money and why the business would be successful was required. If it´s an existing business, like Delsa´s, the borrower must explain why the loan is needed.

“I think they make it a very user-friendly process,” Richardson said “They let you know what you need to do up front. There´s no going back and refiling paperwork over and over.”

SBA offers two kinds of loan guarantee programs.

The most common, the kind the Richardsons qualified for, is one in which SBA guarantees up to 85 percent of a small business bank loan will be paid off even if the business fails. Loans up to $150,000 are guaranteed up to 85 percent, while those above $150,000 are guaranteed to 75 percent.

The loans are guaranteed with federal taxpayer money, but no tax money is used unless the borrowing business goes bankrupt.

“Very few of them do go bankrupt,” the SBA´s Butler said.

A second type of loan guarantee is geared toward existing businesses wanting to expand. These tend to be larger loans, Butler said.

Under this scenario, businesses must secure a traditional business loan for 50 percent of project costs.

SBA then will guarantee 40 percent of the project costs that can be sold to other investors in a manner similar to the way bonds are used by public entities.

The business must then pay the remaining 10 percent of the project cost.

Again, only if the borrowing company goes bankrupt does the SBA pony up taxpayer money to pay the loans off.

So far, Delsa´s is in no danger of forcing SBA to make good on its loan. It´s doing fine under its new ownership, said Richardson, who manages the Ustick location.

“It´s been here for over 40 years,” Richardson said. “The last owners had it for 30 years. Hopefully, we´ll have it for another 30 years.”

To offer story ideas or comments, contact Michael Journee
[email protected] or 208-377-6465

http://www.idahostatesman.com/Business/story.asp?ID=24985