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Pure Water Technology, Inc. Saves Money, Creates Jobs with Help of SBA Financing

Small business with offices in Placentia and Redlands obtains SBA guaranteed refinance in June, saves $7500 per month, creates 6 jobs and plans to hire 2-4 more

SANTA ANA, CA – George Squires had a successful career working as a Vice President for a distributor of office equipment when he discovered an opportunity to purchase the distribution rights to a proprietary platform for delivering purified water.  Curious about the market potential and product, Squires conducted some research and discovered that bottled water sales exceed $12 billion in the United States annually and more than 70% of workplaces offer free bottled or filtered water to their employees.  He also recognized the technology behind the delivery method for most businesses was antiquated, having stayed fundamentally similar to the days when animal skins and wooden carts were used for transportation as opposed to five gallon bottles and delivery trucks. 

Confident that there was a market for purified water and that the product his company would offer is superior to others available, Squires launched Pure Water Technology, Inc. in April of 2006. 

The business grew at a healthy rate for the first few years until 2009, when Squires started to notice that his typical clients were having difficulty obtaining credit from traditional funding sources.  Squires decided to ramp-up the company’s in-house financing program to help counter this trend.  He needed to secure outside investors to buy into the opportunity he saw. 

Squires pitched the opportunity to a couple of venture capitalist friends over lunch in Newport Beach who subsequently invested in the company.  There was a catch though: the money was expensive, with a management fee of $5,000 and a 12% interest rate on his line of credit. 

He knew that refinancing the debt later down the road was the only option if he wanted to be able to pay off his investors and grow the company at the same time.  By obtaining more reasonable terms on his financing, he could save $7500 per month which could be immediately invested into increasing his sales and service workforce.

Squires initially had difficulty securing the SBA refinance as a change in his company’s accounting practices from cash to accrual basis led to a reported loss in his business tax returns.  Lending officers at several banks saw the loss, politely declined, and asked him to return when he could demonstrate three years operating history without a loss. 

But the company wasn’t losing money.  It was growing.  In fact, even with no additional sales this year, the company would have more than $90,000 per month in residual income through its water service agreements.  Early in the company’s history, Squires decided that their placement model would not be to sell the water cooling & purification systems, but to provide a service and maintain title to the equipment, similar to a cable TV or utility company. 

Squires later met Jared Johnson, who works for U.S. Bank’s Rancho Cucamonga office, and submitted a loan request.  Johnson worked with the bank’s underwriters to review the financial statements closely and ultimately decided to fund the SBA guaranteed loan. 

Squires, who has since hired six staff members and is looking to hire two to four more in the short term, credits the underwriter and loan officer at U.S. Bank for taking the time to analyze his financial statements in detail and asking specific questions about his business model.  Though Pure Water Technologies would have been able to continue operating without the financing in place, the line of credit has allowed the company to expand its workforce.  According to Squires, “We’re still in the early adoption stage with this technology.  SBA guaranteed financing has given me enough breathing room to grow my business and take advantage of this emerging market.”

To be eligible to refinance a business loan into an SBA guaranteed loan, the existing debt must not presently be on reasonable terms.  This is defined as a 10% improvement in the company’s cash flow as measured by the changes in the debt service requirement between the existing and new debt structures.  The substantial benefit for businesses wanting to refinance a revolving line of credit or balloon note lies in the ability to stretch payments out over a longer maturity, thereby retaining its working capital for a longer period.  This “terming out” frequently benefits small businesses experiencing growth and is acceptable SBA refinancing justification.