Automotive Classics, Inc., ‘Home of the Honest Mechanic’ finds a Permanent Home with SBA 504 Financing
Automotive Classics Inc., a car repair and service business, can attest to the positive side of acquiring commercial real estate in a sputtering economy. Dave O’Connell , who started Automotive Classics Inc. in Fredericksburg, Virginia, was finally able to locate the right site, a home for his business through the Small Business Administration’s 504 Loan Program. The repair shop is located on half an acre at 175 Chatham Heights Road, Fredericksburg, Virginia.
Automotive Classic Inc. was started over 20 years ago with a focus on restoring classic cars and expanded to a repair service station. The business operated in many rental locations until O’Connell decided it was time to take the plunge into commercial real estate ownership and gain more control over his business. He located a promising ½ acre site.
For financing this new venture, O’Connell approached Rappahannock Economic Development Corporation (REDCO), a licensed non-profit, Certified Development Company that offers long-term fixed-rate financing for small business through the SBA 504 Loan Program. The CDC/504 Loan Program is a long-term financing tool for economic development within a community. The 504 Loan Program provides growing businesses with long-term fixed-rate financing for major fixed assets, such as land and buildings, including expansions, renovations, and construction projects. CDCs work with the SBA and private-sector lenders to provide financing to small businesses. There are approximately 270 CDCs nationwide. This year REDCO hired two new staff members to invigorate economic growth of its programs: Jeff Rouse, Senior Business Development Officer and Diana Lupe, Operations Manager.
When asked whether the ’Cash for Clunkers’ Program had much of a negative impact on his service business, O’Connell replied in the negative but added “maybe a little.” Actually during a time of shortages, jobs and money, he noted that folks generally cut back on general maintenance and service, not repairs. His mission, to provide quality diagnosis and service for a reasonable cost, is what he thinks the customers want and the sign outside the building says it all succinctly in five words, ‘Home of the Honest Mechanic.’ Automotive Classics’ gross receipts have grown each year since 2006 when it acquired the real estate. This indicates that O’Connell is indeed aware of what customers want in an automotive repair shop. In 2008 the business broke the $1 million dollar mark in total sales.
Jeff Rouse, Senior Business Development Officer of REDCO, describes the structure of the 504 program, as a bank loan for 50% and then REDCO provides 40% of the capital with the borrower coming up with a 10% down payment. The interest rate is fixed and is generally lower because of SBA backing. The bank is in a protected position because it has a senior lien on the project. “It’s a great way for our local businesses, like Automotive Classics Inc., to take the next stepping stone by acquiring commercial real estate to house their business. Automotive Classics’ projection of providing continuing employment to five individuals is vital to the economic health of our area.”
O’Connell employs 6 individuals at present, one above the original projection. As President of Automotive Classics Inc., O’Connell no longer works on cars but instead oversees development of the business. The 504 program, by financing businesses like Automotive Classics Inc., contributes to the economic vitality of the greater Fredericksburg area.
O’Connell is working on expanding his business by opening a second location and the announcement of the company’s new branding as “Doc Auto” which is on display in the lobby of the business. After the second location, he will entertain the possibility of several additional stores. When asked if he has a recommendation for budding entrepreneurs, he quips “in this business, I’d tell them ’don’t do it.’” He adds “I already have enough competition.” However when he focuses on the 504 program, he sums it up by stating that “it is a phenomenal program and I’d recommend it without hesitation.”
Richmond Indoor Sports Experience (“RISE”) shines as it experiences its fifth year of success as a world-class indoor sports facility. The 48,000 square feet facility features two playing arenas used for soccer, lacrosse and field hockey as well as a baseball academy on the 2nd floor. Located off Route 288, 2300 Oak Lake Blvd. in Midlothian, Virginia , RISE draws patrons from a variety of leagues, sports, cultures and geographic areas in the greater Richmond area and beyond.
Six years ago, four families of young athletes brainstormed about providing space to serve the soccer community especially during the winter season or bad weather. Soccer, field hockey and lacrosse athletes especially echoed their need for such a facility. These families ultimately decided that they would pursue creating such a facility in the Richmond area.
Neil Carns, a member of one of the families and President, stated “It couldn’t have been done without the SBA and Crater Development Corporation. Declines were received from five lenders before we were able to strike a deal.” RISE was originally financed through the SBA’s 504 program and Crater Development Company. The SBA 504 program provides growing businesses with long-term, fixed-rate financing for acquisition of major fixed assets such as land and buildings. Crater Development Corporation (CDC) is a nonprofit corporation set up to contribute to the economic development of the community. CDCs work with the SBA and private sector lenders focused on providing financing to small businesses.
Typically, a 504 project includes a loan secured with a senior lien from a privatesector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (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.
RISE has a knack for bringing the community, events and people together. First, it brought together four families addressing concerns for winter soccer sports conditioning. The outcome was the development of the successful business, Richmond Indoor Sports Experience that employs 4 full time employees and up to 30 plus part time. Next, it built a community of various interested parties regarding diverse sports programs. This resulted in the establishment of a relationship with sports groups who played on indoor turf fields. Currently, there is a strong and supportive association with Richmond’s growing Lacrosse and Field Hockey population and the baseball training facility.
There are also many cultural and language bridges in existence at RISE as evidenced by the Hispanic league that utilizes its facility. A click on the RISE website [www.RISEindoor.com] reveals bilingual links in both Spanish and English. RISE is a place of cultural diversity.
A variety of nations’ flags fly from the rafters at the RISE facility and suggest that Spanish is by no means the only language you may hear from players and families that come to support them. Soccer hosts an international world of fans and you will find RISE patrons from around the globe. Also, with Valentine’s Day close, there may even be a romantic component since one of the most popular leagues is the coed Social Night League. In coed play, RISE appears to be both community and family friendly.
Carns was asked whether RISE favors certain soccer leagues that are larger or more established. To this Carns quipped “We, at RISE, fly the Swiss flag of neutrality.” “We’ve made a commitment at RISE to enhance the quality of community life by providing a clean, safe, familyoriented environment that people can use year-round,” says co-owner Vanessa Carns. And from all accounts, they do.
RNB Technologies, Inc., an engineering services company based in Stafford, works to improve the accuracy of missile defense systems, such as the trajectory problems encountered with the Patriot missiles during the Gulf War/Desert Storm Conflict of 1991.
“Benefiting from the past enables our current military leaders to address current conflicts with more effectiveness and efficiency,” states Ron Oxendine Founder, RNB Technologies, Inc., a Native American, Veteran-owned, small disadvantaged business located in Stafford, Va.
RNB’s experienced and knowledgeable professionals evaluate and improve missile defense systems to support Joint Navy, Army, Air Force and Marine Corps Commands. Much of RNB’s work relates to integrating divergent software packages, which in simple terms, allows different programming languages to communicate.
“This work is of strategic importance to the defense of the nation,” Oxendine said. The military uses RNB’s staff of 88 highly-specialized employees to evaluate, test and improve areas such as mission event planning and analysis of missile defense performance. In fact, RNB Technologies, Inc. was recently honored as one of the Top 100 Diversity Business for 2006 at the National Diversity Business Conference 29-31 Mar 06 in Las Vegas, NV.
Oxendine, a 20-year veteran of the U.S. Marine Corps, began a career as a defense contractor with Techmatics, Inc., holding the title of Senior Program Manager for the Battle Management Command Control Communications/Systems Engineering and Integration (BMC3/SEI) contract supporting the Ballistic Missile Defense Organization in the Pentagon. An expert in theater air and missile defense, he started RNB Technologies, Inc. with his wife and co-founder, Nell Oxendine, the executive vice president, in July 2000.
RNB Technologies, Inc. has experienced many of the obstacles typical of a growing company including with the availability of funds to market RNB’s capability. The firm sought the assistance of a $75,000 loan backed by U.S. Small Business Administration under the 7(a) Loan Guaranty Program. Oxendine states, “The loan has been repaid in full. However, it was important to our effort to achieve controlled company growth and to ensure payroll and other expenses could be met.”
The 7(a) Program is the SBA's primary lending program provides loan guaranties for small businesses unable to secure financing on reasonable terms through normal lending channels. The program operates through private-sector lenders who provide loans guaranteed by the SBA. A maximum loan amount of $2 million is established. However, the maximum dollar amount of the SBA guaranty is generally $1.5 million. The eligibility requirements are as broad as possible in order that this lending program can accommodate most small business financing needs.
The biggest obstacle faced by RNB was educating the Department of Defense about the advantages of contracting with the company. As a certified U.S. Small Business Administration’s 8(a) Business Development Program participant firm, certified in 2001, they overcame many of these difficulties. RNB credits much of their success in the 8(a) arena to the SBA Business Development Specialist Mike O’Neill, Richmond District Office who provided training and support to the firm’s employees. RNB received nine different $3 million sole-source contracts during its first 5 years in the 8(a) program. This led to RNB’s growth of 118 percent for personnel and 76 percent for revenue in 2005. The SBA’s 8(a) certification was instrumental in the company’s increase in sales from $965,000 in 2001 to $7.6 million in 2005.
The 8(a) Business Development Program is an essential instrument for helping socially and economically disadvantaged entrepreneurs gain access to the economic mainstream of American society. The SBA has helped thousands of aspiring entrepreneurs over the years to gain a foothold in government contracting. Participation is divided into two phases over nine years: a four-year developmental stage and a five-year transition stage. Participants can receive sole-source contracts, up to a ceiling of $3 million for goods and services and $5 million for manufacturing. While the SBA helps 8(a) firms build their competitive and institutional know-how, the agency also encourages them to participate in competitive acquisitions.
To qualify for program certification, a small business must be owned and controlled by a socially and economically disadvantaged person. Under the Small Business Act, certain presumed groups include African Americans, Hispanic Americans, Asian Pacific Americans, Native Americans, and Subcontinent Asian Americans. New rules make it easier for non-minority firms to participate by proving their social disadvantage.