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Archive for Friday, June 24, 2011

Small business loans help hundreds of Lawrence companies flourish

City boasts 95 percent payback rate

Chris Godfrey, a co-owner of Eangee, at 1380 N. Third St., packs some lamps for shipment. Eangee received a small-business loan to help the lamp and home furnishings company grow.

Chris Godfrey, a co-owner of Eangee, at 1380 N. Third St., packs some lamps for shipment. Eangee received a small-business loan to help the lamp and home furnishings company grow.

June 24, 2011

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Percentage of top categories of retail businesses in Lawrence receiving SBA7a loans. Of the 540 loans made in Lawrence since 1965, 131 were given to retail businesses.

Percentage of top categories of retail businesses in Lawrence receiving SBA7a loans. Of the 540 loans made in Lawrence since 1965, 131 were given to retail businesses.

Percentage of top business categories receiving SBA7a loans in Lawrence. There have been 540 such loans made to Lawrence businesses since 1965. Loans to retail-based businesses, which numbered 131, are excluded in this graphic and broken down in a separate chart.

Percentage of top business categories receiving SBA7a loans in Lawrence. There have been 540 such loans made to Lawrence businesses since 1965. Loans to retail-based businesses, which numbered 131, are excluded in this graphic and broken down in a separate chart.

When Eangee Inc. co-owner Chris Godfrey and his business partners wanted to expand their downtown home furnishing store into a wholesale distributor, they needed money.

“We were desperate to get inventory in,” said Godfrey. But as a small business, they didn’t have the capital.

That’s when Godfrey received help from an SBA 7(a) loan through the U.S. Small Business Administration. The $137,000 loan helped Eangee expand into a warehouse at 1380 N. Third St. in North Lawrence, where the company now ships specialty, eco-friendly lamps and other home goods across the country.

Eangee was able to pay the loan back, and Godfrey said his business has been expanding.

“Without the loan, we wouldn’t be where we are today,” he said.

Since the 1960s, SBA loans have helped hundreds of Lawrence businesses start up or expand — everything from quirky downtown retailers to high-tech software companies.

“I can drive down any street in Lawrence and see at least one business that wouldn’t be there without an SBA loan,” said Tim Metz, vice president of loan services at Douglas County Bank.

SBA loans work like this: A business applies for a loan from a bank. If the business lacks investors or startup capital, the bank can help the business apply for an SBA loan, which is administered by the bank. The SBA offers a guarantee for the bank by agreeing to pay back 50 to 90 percent of a loan if the recipient defaults. Metz said the program “mitigates risk” for lenders and helps some businesses get loans they may not have been able to secure otherwise.

But it’s a stringent process, Metz said, and the percentage of funding that is paid back shows the program is selective in the businesses it takes a bet on.

Between 1965 and September 2010, Lawrence businesses have secured 540 SBA 7(a) loans. More than $50 million has been backed by the SBA guarantee, and more than 95 percent of the loans have been paid back by businesses.

That compares well with standard business loans, Metz said, adding that his bank strives to keep its “payback” rate between 95 and 97 percent.

The statewide SBA loan data shows Lawrence outpaces the state when it comes to repaying the loans. Of the more than 22,000 SBA 7(a) loans given statewide since 1957, less than 93 percent of the loans have been repaid, compared with the 95 percent rate locally. The SBA wasn’t able to provide national data for payback rate, as the SBA calculates the statistics differently.

Despite the recession, funding for SBA 7(a) loans — appropriated by Congress — is available for those who can pass lenders’ scrutiny, said Neida Heusinkvelt, assistant district director for the SBA’s Kansas City District office.

Heusinkvelt said the majority of such loans go to businesses looking to expand, such as Eangee, but some go to startups, such as the downtown shoe boutique Foxtrot, 823 Mass., which opened last October.

The success of SBA loans in Lawrence shows the area provides a good atmosphere for startups and expanding businesses looking to utilize SBA 7(a) loans, she said.

For more information about the SBA loan program, visit sba.gov. Consulting assistance for new businesses is also available from the KU Small Business Development Center. For more information, visit its website at bit.ly/itSrAP.

Interactive map

Map of Lawrence businesses that received SBA7a loans

View SBA7a loans in a full screen map

Comments

Lawrence Morgan 3 years, 5 months ago

Why don't you put together all the websites of small companies throughout Kansas? And if the websites are not created, volunteers could help them do so. This would be a great help to see what is really made in all parts of Kansas, and would also increase business and even more ideas for the future. Lawrence

vuduchyld 3 years, 5 months ago

toe, why would the loans get called based on anything that would happen to the treasury? They are loans made by banks.

Even if the bank goes belly up, the loans are financial ASSETS at that point. Somebody would buy the assets.

jafs 3 years, 5 months ago

They're guaranteed by the federal government.

vuduchyld 3 years, 5 months ago

So, again, I ask...since it's NOT even a loan made by the federal government, why would a guarantee get called?

Answer: it wouldn't.

jafs 3 years, 5 months ago

Well, it's possible that the government may decide we can't afford to keep guaranteeing these loans, if we're paying out money to banks when recipients default, isn't it?

OldSoldier 3 years, 5 months ago

"Of the more than 22,000 SBA7a loans given statewide since 1957, less than 93 percent of the loans have been repaid, compared to the 95 percent rate locally." Sure there is a mis-statement here, or why would such a default rate continue to be subsidized?

just_another_bozo_on_this_bus 3 years, 5 months ago

I'd say it was just poorly worded. My guess is they meant that the payback rate was somewhere between 92% and 93% nationally, but 95% locally.

shaunepec 3 years, 5 months ago

Yup, payback rate 92.4% in state, 95% locally.

Lawrence_Pilot 3 years, 5 months ago

Yeah, they are great, as long as you have good credit and plenty of collateral and a long history of profits. Without those, theyll send you packing... I know from a 2010 experience.

Flap Doodle 3 years, 5 months ago

In other news: "(CNSNews.com) - Treasury Secretary Timothy Geithner told the House Small Business Committee on Wednesday that the Obama administration believes taxes on small business must increase so the administration does not have to “shrink the overall size of government programs.”..." http://www.cnsnews.com/news/article/geithner-taxes-small-business-must-rise

Clara Westphal 3 years, 5 months ago

My son needs money to start a business but has had no luck in getting a loan or backing in any form.

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