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Dreams Do Come True With a Little Help From SBA
Pete Morones, a bilingual clinical psychologist, didn’t have to think twice about buying a building to house his office. It made sense to purchase a building for his practice rather than continuing to pay rent. Morones now owns his own office building and rents out space to others. Most people aspire to own a building for the same reason they aspire to own a home; they are more in control of the use and the cost. Evergreen Business Capital helped Morones buy his own real estate through the Small Business Administration's 504 loan program. “Morones needed $370,000 to buy the building — at a time when the economy was tanking and banks just didn't want to lend," recalls Evergreen Senior Loan Officer Lori Milton.
Morones is a business banking client with Bank of America. Lori Milton asked the bank to loan Morones the money for his building. The bank funded Morones $250,000, Evergreen funded $83,000 and Morones came up with the rest.
Proceeds from 504 loans must be used for fixed asset projects such as: purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping; construction of new facilities, or modernizing, renovating or converting existing facilities; or purchasing long-term machinery and equipment.
Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the Certified Development Company like Evergreen Business Capital (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped. To be eligible, the business must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, the business qualifies as small if it does not have a tangible net worth in excess of $8.5 million and does not have an average net income in excess of $3 million after taxes for the preceding two years. Loans cannot be made to businesses engaged in speculation or investment in rental real estate.
"Because we allow business owners to get into a loan with only 10 percent down, it helps them hold onto their working capital and helps them to purchase their existing rental building if the building owner suddenly offers it up," Milton said. "Most banks want 25 to 30 percent down on a building, and that’s a lot of money if you’re not actively saving money for the purchase."
“Evergreen made it possible for us to finance our project; something we had been working on for some time. Ms. Milton went above and beyond to assist us with securing financing as we encountered unforeseen obstacles in the current market,” said Morones.
Small Business Owner Exports Earth-friendly Pesticide
Reducing the Risk of Harmful Pesticides: New technology wins export markets.
Most pest control programs have a problem: They put too much of a particular chemical into the environment, and much of it is spread without being effective. Residues can be dangerous to humans and toxic for animals. The runoff can become problematic for water quality. The solution? Integrated pest management (IPM), a combination of chemical, biological, and cultivation techniques, minimizing negative effects.
A company based in Portland, Oregon, which has taken its name from this method, IPM Tech, Inc. has created just such a line of products. This new method is easy to use, effective, and environmentally benign. Its use is growing in agriculture and forestry. It has also attracted attention abroad, and exports are spreading the technology to Australia, South Africa, and most recently Belgium.
"These innovative products will sell themselves," said Philip Kirsch, president and founder of IPM Tech, Inc. "Their potency, cost-effectiveness, and environmental benefits will make them the most competitive solution to agriculture's and forestry's pesky problems." After graduating from the University of Queensland with a degree in entomology, Kirsch's career centered on the use of pheromones for insect monitoring and control in the worldwide agricultural pest control market.
The way to detect pests and determine the optimum timing for sprays is through the use of pheromone traps. Pheromones are chemical substances secreted by animals that influence the behavior of other animals of the same species. They are usually wind-borne, but may be placed on soil, vegetation, or various items. Once the structure of the behavioral chemical is determined, it is produced synthetically and used for a range of management purposes. A lure is saturated with synthetic pheromones. The lure emits the synthetic pheromones at a predetermined level and rate for a specified period. The lure is placed in a trap and set up in a specified manner and location, depending on the habits of the insect. The insect's behavior, size, population level, and the user's bio-monitoring objectives determine the use of a bucket or sticky trap.
Creative Solutions
The secret of IPM Tech's success is combining pheromones of specific insects with a pesticide in a blend that attracts and kills the target pest. The pheromones, which are synthesized versions of the sex hormone produced by the female of the species, attract the male insect to the poison that is placed in a concentrated droplet on a tree trunk. When this method is applied on an acre of apple trees, only about three and a half to five grams of insecticide per treatment is needed. Even with three applications per growing season, only a maximum of 0.5 ounce per acre is necessary to control the pest. In comparison to the 2.75 pounds of pesticide per application in traditional spraying techniques (which require typically six applications per season), the difference between these two methods becomes clear.
A little-known fact is that less than 1 percent of the insecticide in a traditional spray application actually hits its target, which makes IPM's LastCall™ a groundbreaking pest control method. It is superior in eliminating chemical runoff that can contaminate the groundwater, since such small amounts are used. As the application is targeted, it is more effective and at the same time more cost-effective. In field trials the attract-and-kill method has demonstrated a 300 percent greater kill rate, proving that the technique developed by IPM Tech, Inc. outperforms traditional spraying by a wide margin.
Financial Resources
This type of research and development does not come cheap, and the personal investment by IPM Tech's owner Phil Kirsch has been enhanced by the federal government's research grants in support of new technology. "IPM Tech has been able to develop these innovative techniques through the assistance of many federal grants," said Kirsch, who is a well-known scientist and started the business in 1994.
The company's success in attracting research and development grants through Small Business Innovative Research Program has brought awards of proposals from several federal agencies, such as the U.S. Department of Agriculture, National Institutes of Health, and the U.S. Department of Defense. Without these grants, the long lead times for bringing new products to market might have left the business cash starved and unable to weather the low revenue years.
Sales growth has been boosted by exports as IPM Tech's products find overseas markets. Since 1997, the Portland U.S. Export Assistance Center has been the "one-stop shop" for exporting for IPM Tech, said Scott Goddin, director of the center. IPM Tech developed its export savvy via Commercial Service industry sector reports on New Zealand, South Africa, the Netherlands, and Canada. Commercial Service trade specialists also helped with regulatory issues and referral to Foreign Agricultural Service staff when needed.
Financed with the Small Business Administration's Export Working Capital Program, exports are a profitable part of the company's sales now. The most substantial export so far, a large contract from the Belgian Ministry of Forestry for lures to combat an outbreak of a non-native bark beetle, would have exceeded IPM Tech's financial capacity. "The SBA program has come to our rescue twice," said Dennis Kviz, who is new to IPM. "The first transaction with South Africa could not have happened without the assistance of the SBA, and now the Export Working Capital Program has again provided us with extraordinary support."
Exports to 14 countries now are just the beginning, said Kirsch, as integrated pest management products continue to draw the attention of world markets.
Small Business Achieves Growth with 504 Loan
Drew acquired working knowledge and business savvy while attending high school and college working in his father's business, Eugene Tile Company. After college, he was asked by his father and brother to go into business with them, and they opened a tile distribution warehouse and retail store. He continued with the family owned business for another three years. After discussing the idea in-depth with his wife and other people, Drew decided to start his own business.
Drew established Intrepid International in 1993, operating from his home. For three years, Drew worked as a sole proprietor establishing a strong customer and supplier base. Drew's knowledge and experience in the industry allowed him to build an excellent reputation within his field. Drew has taken his small home based business to a company that had revenues in excess of $6,000,000 last year and is on target to reach $7,000,000 by this year-end. His profits have grown to an impressive $700,000 for the year ended 12/31/02. Intrepid has grown from a small two-employee company (Drew and his wife, Leslie) to a current staff of 20 in ten short years.
In 1996, Drew incorporated and established Intrepid International, Inc. d.b.a. Intrepid Marble & Granite. At that time, he established a banking relationship with Key Bank. He opened his company account with a check for $300,000, which represented his entire working capital fund. While working capital was limited his ideas, drive and love of his business were not. He immediately opened a small office, showroom and warehouse facility and Intrepid International, Inc. was well on its way. He turned his focus to natural stone at that time, discontinuing ceramic tile sales. He continued to promote the sale of slab material to the remodel and cabinet industries. Eventually the company moved into a larger facility, leasing a total of 17,000 square feet, which included warehouse space for his ever-increasing inventory of marble and natural stone products. Drew was unable to lease all the space he needed in one building and had to work around having two leased facilities. It soon became apparent that even this amount of space would not be large enough to meet the growing demand for marble and stone, and Drew began to look at building sites to purchase.
Between the fall of 2001 and the summer of 2002, yet another milestone was reached by Intrepid. They purchased and completed the remodeling of a 30,000 square foot building, located in inner Southeast Portland. The building houses both the offices and warehouse space. Key Bank provided the funding for both the purchase of the building and the refurbishing via a SBA 504 loan.
While growing and diversifying his company, Drew remains active in his community. During the past year, he assisted his local parish in the construction of a new church. He participates in Cancer Society of America, Doernbecher Children's Hospital and Kids Soccer programs. He is an active member of the Homebuilders Association, Remodelers of Oregon Association and National Association of Credit Manager. He is a very involved family man with his wife and four children.
