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Home-Grown Philadelphia Firm Preserves 180 Jobs and Reinforces City’s Maritime Industry Prominence, Thanks to SBA Funds
Not so very long ago, much of the storied Philadelphia Navy Yard lay dormant. Once a vibrant hub of the nation’s maritime industry — employing 40,000 at its height during World War II and building and launching the likes of the battleship New Jersey into U.S. Naval service — the Yard closed in 1995, and 7,000 jobs were lost. Although the Navy maintained some military facilities on the Yard’s western end post-closure, acre after desolate acre of the sprawling 1200 acre shipyard lay abandoned.
For many, the decaying Navy Yard stood in silent testament to the broader decline of industrial America. By the turn of the last century, untold numbers of industrial and manufacturing sector firms were shuttered in Philadelphia, alone. Marketplace changes and foreign competition ravaged those sectors, and industry stalwarts like Rhoades Industries, a mechanical contracting and fabrication firm doing business in Philadelphia since 1938, were no exception.
But endings often make way for new beginnings, and, thanks to resourceful leadership and SBA financing, Rhoades Industries is, once again, no exception to the rule. As traditional opportunities dwindled, Rhoads tapped into new markets, re-shaped its customer base, and wrote its own ticket for success in the modern economy, complete with a new address at the now revitalizing Philadelphia Naval Shipyard, re-dubbed the Philadelphia Naval Business Center.
Setting the Stage for Success
In 1890, Rhoads Industries’ owner, Daniel Rhoads’, great grandfather, Samuel Rhoads, opened a sheet metal fabrication shop in Philadelphia. The business grew with the city’s development, and Samuel passed it on to his son, Samuel, who, in 1938, named it Rhoads Industries. In the years that followed, Rhoads Industries evolved to include mechanical contracting and produced many large and complex metal structures and devices for both local and international customers. That work lead Rhoads to team with The Department of Energy, as well as a number of Fortune 500 firms such as DOW, Northrop Grumman, Lockeed Martin, and Air Products.
By the turn of the last century though, industry tides were turning. Foreign competition was seizing hold of the industrial and manufacturing sectors’ customer base, and Rhoads’ competitors were failing. To survive, Rhoads’ would look to its own upstart roots. Just as it had at its founding, Rhoads needed to identify a new customer base and tap into it with products tailored to its needs. In short, Rhoads needed to re-invent its business model to survive.
Charting a New Course
As more traditional customers fell away, Rhoads’ work for the U.S. Navy increased. Rhoads mechanical engineering and sheet metal expertise was a perfect fit for the Navy’s needs. Work repairing Navy ships and harvesting spare parts from retired Navy ships for use on other Navy vessels was plentiful. By mid-decade, Rhoads had won federal government contracts with the U.S. Navy had developed substantial goodwill with the Department of the Navy and other defense contractors at the Navy Yard Industrial complex. This created a solid new business segment for Rhoads.
By 2006, it was clear that Rhoads’ next chapter would be inextricably tied to the maritime industry, and company head Dan Rhoads focused on developing that business. Rhoads already knew his company’s Philadelphia headquarters’ proximity to major waterways and ports had given it an edge. So, in a move that would literally re-shape the entire company, Rhoads set out to make the most of his Philadelphia homebase by moving the entire operation — then located in two separate facilities in Northeast Philadelphia — to the old Philadelphia Navy Yard
To insure further development of its maritime and non-maritime business, alike, Rhoads purchased buildings at the Navy Yard in 2006 through a Philadelphia Industrial Development Corporation financing program. Rhoads’ new Navy Yard location made it possible to consolidate its two original Philadelphia-area sites into a single location while expanding its capabilities on both maritime and non-maritime-related projects. Rhoads could continue to offer traditional mechanical contracting and fabrication services in heavy steel and sheet metal fabrication, complex precision assembly, and equipment installation contexts. But its new facilities boasted a unique 150-ton overhead crane capacity, precision build platforms and sandblast and paint capabilities that could take its capabilities to a new level. And the Navy Yard’s location – right on the Delaware River and complete with dry dock and pier – allowed Rhoads to offer regionally un-rivaled ship repair and ship building services.
By 2011, time had told the tale – Rhoads’ move to the Navy Yard was an unmitigated success. The firm’s traditional customers, including some of the area’s largest and most prominent manufacturing and industrial services companies, were able to route an even greater variety of projects to Rhoads, thanks to its upgraded facilities. Meanwhile, Rhoads’ new shipbuilding and repair services had won it a variety of new federal government contracts with the United States Navy.
But financial reality was setting in. Full payment on the original loan financing Rhoads’ Navy Yard facilities was coming due before Rhoads’ full consolidation into the single Navy Yard site could be completed and before it was possible for Rhoads to tap into all of the promise for profit that the new facilities held. Rhoads’ 180 jobs hung in the balance as Rhoads’ leadership sough new financing to secure its future.
That’s when Rhoads turned to SBA for help.
In 2011, Rhoads looked to SBA and Philadelphia-based Certified Development Company (“CDC”) DelVal Business Finance Corporation to refinance the PIDC loan that had financed Rhoads’ initial move to the Navy Yard. The new financing that that deal put in place for Rhoads under SBA’s 504 loan program bought Rhoads the time that it needed to make a real go of its new Navy yard facilities – thanks to the 504 Program’s favorable interest rates and generous loan pay-back period – saving Rhoads’ tens of thousands of dollars, saving the 180 jobs on Rhoads’ employment roster, and saving yet another generation of commercial enterprise from closure at Philadelphia’s Navy Yard. With much-needed capital now freed from burdensome loan payments, Rhoads could expand and improve its Navy Yard facilities and capabilities and complete its consolidation into a single Navy Yard site, fast-tracking job growth.
SBA’s 504 Loan Program is a tiered financing vehicle that provides growing businesses like Rhoads Industries with long-term, fixed-rate financing for major fixed assets, such as land and buildings. 504 loans are available through CDC’s like DelVal Business Finance Corporation, which are economic development organizations that work with SBA and conventional lenders to offer loans under the 504 Program to qualified borrowers. Typically, a 504 loan is 50% funded by a conventional lender and 40% funded by the SBA’s 504 Program, requiring only a 10% borrower equity injection. Loans through the program are often an affordable option for borrowers because they require a relatively small borrower equity injection and generally offer favorable blended interest rates and repayment terms that are often longer than standard.
Today, thanks to SBA 504-Program financing, Rhoads’ place at the Philadelphia Navy Yard is secure. The 180 Rhoads jobs that were saved by the new financing have meant continued revitalization of the six acres of the historic Navy yard that Rhoads controls and untold savings for the U.S. Navy through Rhoads’ continued contract work at the Yard harvesting ship parts from decommissioned naval vessels for re-use. But, more than that, those 180 Rhoads jobs have meant hope – hope for continued and growing employment opportunities in eastern Pennsylvania, hope for a maritime industry once counted out, and hope for a national economy fighting for recovery.