SBA loans breed success

BOISE _ It was only one of 356 loans the local office of the Small Business Administration was involved in over the past year. But that 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, she said.

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 are getting.

More than $70 million in loans was meted out to the 356 businesses through two plans offered by the Boise office in the past year. That is 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, Idaho, dairies in Oakley and Filer and the Idaho Falls Surgery Center.

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, a loan officer, said the low-interest rates draw small businesses. 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 would not disclose the amount of the loan that allowed her and her partners to buy the company, which sells homemade ice cream wholesale and at a Boise retail outlet. But she said the loan — a traditional bank business loan that was mostly guaranteed by the SBA — paid for the bulk of the property and a remodeling job, with a little left over for startup 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 with 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 is an existing business, 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 most 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 over $150,000 are guaranteed to 75 percent.

The other type of loan guarantee is geared toward existing businesses wanting to expand and tend to involve larger amounts, Butler said. Businesses must secure a traditional loan for 50 percent of project costs. Then 40 percent of the cost is financed by other investors who get an SBA guarantee as protection. The business has to come up with the remaining 10 percent.

Only if the business goes under does the SBA tap taxpayer money to make good on the guarantee.

And, Butler said, "very few of them do go bankrupt."

http://www.spokesmanreview.com/news-story.asp?date=111702&ID=s1255198&cat=section.business