This is a story about being nimble.
Later this week an industrial warehouse in Missoula, which has been completely transformed, will reopen as Bitterroot Gymnastics – providing children and families throughout our community with a safe space to learn and practice.
While the concept of a big space for a gymnastics school isn’t necessarily innovative, the path to making it happen certainly has been.
Owner David Stark had done everything right. As a former student and then employee of the company, he already had extensive knowledge of the gym when he purchased it in 2005. Then, as an owner, he had worked hard to save costs, provide great service, and grow the business. Now that his work was paying off and his business was expanding, he simply needed more space. But he didn’t have the capital to expand. He knew that his business showed solid profits and great income potential, but he didn’t have strong collateral and so wouldn’t qualify for traditional financing.
When David came to visit Montana CDC, things fell into place. The US Small Business Administration had just come out with its new Community Advantage program. David became the first business owner in Montana and, in fact, the entire SBA region 8 to take advantage of it. Now Bitterroot Gymnastics is about to open a new gym and our community is about to see more jobs.
While we don’t always think of government agencies as being innovative or quick to react, the SBA’s Community Advantage program is a shining example of how good government and smart businesses can work together to make communities prosper.
SBA administrator Karen Mills explains that the Community Advantage program is a reaction to tightening credit markets. The program’s goal is to make more loans available to small business owners, minorities, and women in rural areas. The SBA has similarly reacted with products and programs in the wake of natural disasters such as flooding and hurricanes. It’s all about a government agency learning to serve customers and coexist in an ever-evolving marketplace – just like companies – big and small – must do all across the country.
This is the nimble part.
In Montana alone, the SBA lent out over $137 million dollars for businesses last year. They did it through lending partnerships with national and community banks and non-bank lenders like Montana CDC all across the state. The SBA also responded to businesses in need by providing disaster recovery loans, awarding grants and programs to help with technical assistance, and instituting training programs in entrepreneurship, business development and government contracting.
In January, President Obama elevated the Small Business Administration to a cabinet level position, with Karen Mills appointed as Cabinet Secretary. This is in conjunction with a proposal to consolidate the SBA with five other related agencies including the Department of Commerce, Office of the US Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, and the Trade Development Agency. The reasoning behind the consolidation is that it will ease the regulatory burden on businesses and save money from the duplication of services. The hope is that the new alignment will also increase cross-agency collaboration.
We like to think of it in business terms as a merger – that the government is acting as a company facing an ever-changing marketplace and agilely responding to best compete and provide services for its customers. We hope it is successful and that the SBA remains as innovative and competitive as they have proven to be here in Montana.
In the meantime, the SBA, banks, and non-bank lenders are out there reacting and responding to market conditions and working collaboratively to meet the needs of small businesses. By using innovative financing solutions like the Community Advantage program, borrowers who fall outside the traditional realm of bankability are now venturing into new product lines, expanding their locations, serving new markets, and creating new jobs for Montanans.
Montana business owners like David Stark often have a sophisticated understanding of their industry and their specific markets – they just need the capital to put their ideas for business growth in motion. Thankfully the SBA will continue to be there to spot them.
As part of the Small Business Jobs Act of 2010, the SBA provided temporary authority allowing refinance of existing eligible debt under the SBA 504 loan program. The program, administered through Certified Development Companies (CDC), typically finances acquisition of owner occupied commercial property and large equipment needs. In an effort to stimulate the economy, the loan program can now temporarily refinance certain eligible debt on property, without additional funds being borrowed to expand a facility.
Montana Community Finance Corporation, in partnership with Zions First National Bank of Idaho Falls, Idaho, obtained SBA approval under this temporary authority, and funded the first such loan made in the State of Montana since this change was made to the program.
Derek Ence, owner of Ence Properties LLC dba Hotel Developers Missoula Staybridge, said “I think the SBA helping us small business owners refinance our property in this difficult lending environment is a very helpful thing to help the economy recover and provide jobs for our good local people.”
Zions Bank utilized the new SBA 504 Refinance Program to benefit the customer, local community/economy and to strengthen Zion Bank’s position, including:
- giving Zions Bank some flexibility if the borrower/hotel requests future funding needs to capital/FF&E improvements;
- offering the SBA portion at a low fixed rate for 20 years, benefitting the borrower’s cash flow; and
- increasing the term of the loan to 10 years instead of the standard 5 years, with SBA backing, utilizing a 25 year amortization.
Linda Kindrick, Executive Director of Montana Community Finance Corporation, the CDC that facilitated the loan approval, said “Derek is a great customer and business owner. He was easy to work with in preparing the application for the loan. Allan Woolley at Zions Bank was also very accommodating in supplying all the information needed to meet the requirements for refinance of their existing debt. We are proud to have been able to help both the business and the bank take the next step.”
The refinance of certain eligible debt is a temporary program that ends September 27, 2012. Banks and small businesses need to act fast to take advantage of this great refinancing option.
The basics of the SBA 504 refinance loan are simple:
To be eligible, the small business must be a for-profit company that has a tangible net worth of less than $15 million and after tax profit of less than $5 million.
• The debt to be refinanced must have been entered into at least 24 months prior to the SBA refinance application
• The qualified debt must be for a commercial loan which is current and has been paying as agreed under the original or modified bank terms for the past twelve months
• The eligible small business must currently occupy 51% of the property to be refinanced
• The refinanced amount can be up to 90% of the appraised value of the subject property
• Existing 504 projects and government-guaranteed loans are not eligible to be refinanced
Montana Community Finance Corporation (MCFC) is a Certified Development Company licensed and regulated by the U.S. Small Business Administration (SBA) to deliver 504 loan financing. MCFC’s role is to package, process, close and service SBA 504 loans in the state of Montana and has been doing so since 1984. The professional staff, located in Helena, MT works with the lender and/or the small business owner to tailor a financing package that meets program guidelines and the credit criteria of the business. Contact MCFC to see how they can help you – whether it be refinance of existing debt or new financing.
The love of ice cream and the desire to get into business is what drove Brian and Kelly Ackerman to purchase The Parrot Confectionery, a Helena Landmark.
The Parrot is currently celebrating it’s 87th year in Helena and is saying goodbye to longtime owners the Duensing’s. The Parrot has been part of the Duensing family for over half a century and they are now ready to turn over the business to new owners the Ackerman’s.
Brian and Kelly were looking for a way to return to their home state of Montana, when discussing over a bowl of ice cream in their home in Maryland, brought them to the idea of going into the candy and ice cream business. And that was the beginning of the journey that brought the Ackerman’s home to Montana and into the world of candy making.
The Ackerman’s were able to purchase The Parrot only by way of the U.S. Small Business Administration (SBA). When Brian first contacted lenders looking for financing it was difficult if not impossible to get the financing they needed to purchase the business since a lot of it was for blue sky. (Blue sky meaning customer base.) But with Brian’s knowledge of SBA and their loan programs, he was able to contact the right people at Wells Fargo and get the money needed to take over this well known confectionery.
“There was no way I was going to be able to get the financing without the SBA guaranty,” Brian said.
“I was sitting on pins and needles waiting to hear if we got approved, and was so excited when it went through,” said Brian. “The (loan) process was a great lesson in patience, it got me prepared for the business I was about to take over.” They started in October of 2008 and signed the final papers July 1, 2009, but it was worth the wait.
When asked about the most difficult part of learning the business reins, Brian said “it’s hard to get a grasp on how much product we go through and keeping our ingredients stocked and the lead time needed to get the inventory delivered.”
The Parrot goes through 100 pounds of sugar a day and that makes about 3 batches of candy. The basement is getting stocked for the holiday season which means there’s about 6,000 pounds of chocolate in the basement waiting to be made into truffles, parrots and other assorted candies.
Brian said it’s hard because the Duensing’s do everything second nature and they’re starting from scratch (no pun intended) and need to know the how, when and why for everything. They’re taking it all in while the Duensing’s stick around for a year to help show the Ackerman’s The Parrot way of doing things.
The Parrot is known not only for it’s ice cream, candy and lunch menu, but also for it’s atmosphere. And as promised the Ackerman’s don’t intend to change a thing. A few additions may come in the future, but nothing dramatically different. One of those additions includes shipping year round and possibly the presence of The Parrot on the internet.
But for now it’s business as usual as The Ackerman’s stir their way into their dream of business ownership.