By almost any measure, the U.S. Small Business Administration just finished a record-setting year of helping businesses in Colorado.
Statewide, the SBA approved $622.5 million in small business loans for the fiscal year that ended Sept. 30, an all-time record and an 11.5 percent increase over the last fiscal year. The SBA’s Colorado office approved 134 loans totaling more than $60 million to businesses in El Paso County.
That Colorado district office also set records for lending to minority-owned businesses ($117.7 million), Asian-owned businesses ($87 million) and women-owned businesses ($95.6 million), as well as businesses owned by veterans ($79 million) and Native Americans ($5.3 million).
Of the 1,388 loans approved in the last fiscal year in Colorado, 1,117 were in the SBA flagship 7(a) working capital guaranty program totaling $457.1 million. Two-hundred seventy-one loans were made in the 504 program, which provides small businesses with long-term, fixed-rate financing to buy real estate and major fixed assets. The 504 loans totaled $165.4 million this past fiscal year in Colorado.
A 504 loan typically involves the bank making half the loan and the SBA coming in at 40 percent of the loan. That leaves 10 percent for the small businessperson to contribute as equity.
The biggest news for small businesses is that, for the 2014 fiscal year, fee levels for small business loans of $150,000 or less will be zero, which “ultimately makes those loans much more attainable,” said Matt Varilek, SBA Region VIII administrator, who recently visited the Colorado Springs Business Journal along with Greg Lopez, the Colorado SBA director.
Region VIII includes Colorado, Wyoming, Utah, North Dakota, South Dakota and Montana.
The average fee for an SBA loan is $2,000 to $3,000, “not a huge impact, but it all adds up,” Varilek said.
“I’m very proud of what we’ve been able to do here in the state, with over $600 million for small businesses through the lending programs,” Lopez said.
“It ended up the best year ever with lending products for the state of Colorado. It is an all-time high,” Varilek said.
They touted programs specifically targeted to veterans.
“We know veterans have a high rate of starting businesses,” Varilek said. “It’s important they know about the programs the SBA has to offer.”
Their jobs are to broadcast the services of the SBA because “we don’t want to be the best-kept secret,” Varilek said.
The SBA has strong lending programs, but “only with strong partners in the local banks,” Varilek said. He added that the Small Business Development Center can also provide critical help to business owners who want an SBA-backed loan.
Dyanna Haley-Rezac, of Rezac & Associates Physical Therapy, received an SBA loan this year that helped the business owners purchase a larger building. Two months ago, the company moved in and renovated the 6,800-square-foot space at 855 E. Citadel Drive.
Its four doctors of physical therapy have about 700 patient visits per month, Haley-Rezac said. The company started in 2009, and the first year it served 1,500 patient visits.
“That has increased 1,500 a year, so we’re probably at about 8,500 patient visits now,” Haley-Rezac said.
Initially, the business borrowed $45,000, which helped it consolidate some of the start-up loans. The more recent loan is for $900,000, and the business owners, Haley-Rezac and her husband Scott Rezac, contributed a 10 percent match.
The therapists see a high percentage of clients who have experienced traumatic brain injury and stroke, and the loans have helped them buy specialty equipment.
Zeezo’s owners Mark and Jessica Modeer have about $1.6 million in multiple SBA loans, Jessica Modeer said.
They used much of the SBA loan money to move two doors north, from their original location at 104 N. Tejon St. to their new location at 112 N. Tejon. They purchased the building for $1.265 million.
To make an SBA loan, “there can be considerable paperwork involved,” Mark Modeer said. “But it allows small businesses to get in with a smaller down payment.”
Mark Modeer credited his wife with doing “all the work.”
“We thought underwriting would be finished in two weeks, and it was two months,” Jessica Modeer said. That pushed the actual move to mid-October, Zeezo’s busiest retail season.
“I thought it was going to be very straightforward, but the amount of documentation was overwhelming,” Jessica Modeer said.
But the loan was “hugely advantageous,” because the business was able to secure operating capital and funds for construction and for the move.
“Then we had the money for staffing, more merchandise, signage,” Jessica Modeer said.
In the past, the Modeers had used their own money, but these SBA loans “gave us a cushion and operating capital,” she said. The couple also paid the remainder of their lease at 104 N. Tejon.
Jessica Modeer credited Central Bank and Trust with their success in getting the loan to make their move happen. Not only is the bank locally held, but “their loan officers shop with us and knew we were a viable business,” considering that costumes are “the fringe of specialty retail,” she said.
“They were willing to come in and look at our books and know we are a good business, profitable year-round,” she said. “I don’t think we could have done this with another bank.”
Kim Gordji and her husband Ahmad now own Dental Arts Studio, a laboratory that makes crowns and bridges for dentists.
Immigrating from Sweden with a dental technology degree “and a suitcase full of books,” Ahmad Gordji began working for the company 17 years ago, seven years as an employee and later as general manager.
In 2003, the previous owner wanted him to purchase the business, and the Gordjis realized they needed a loan, so they appealed to the SBA.
“We went down with the prior owner, gave [the SBA] the business plan, all this information,” Ahmad Gordji said. “They said you have the perfect formula, perfect credit.”
The company was generating a profit and had not experienced a loss in 10 years, he added.
After hearing positive feedback, “three weeks later, they left a message on the answering machine — denied,” because he was “new to the country,” Ahmad Gordji said.
The previous owner then offered to carry the note for the Gordjis, but he wanted $50,000 down, so they again appealed to the SBA, he said.
“They said $50,000 is no big deal.” But three weeks later, the SBA again denied the couple, Ahmad Gordji said.
“We had to scramble,” but the couple found the seed money, and nine years later, the Gordjis paid off the company, he said.
In January, the couple decided they wanted to buy the real estate. Thinking that multiple successful years in business would work to their advantage, they decided to apply for a lower-interest rate SBA loan.
Their bank offered to loan the entire amount, but the couple wanted the lower interest rates from the SBA. Under the SBA’s 504 program, the bank funded half the loan, they funded 10 percent and the SBA was to fund 40 percent.
“One month before closing, SBA said no,” Ahmad Gordji said. For tax reasons, the couple had to close in December, but the SBA paperwork wasn’t complete by then. So, the Gordjis’ bank offered to give them a bridge loan for the 40 percent.
The Gordjis were “supposed to get a lower interest rate through the SBA, but it didn’t matter because the savings were offset by another $9,000 in closing costs” by the bank loan, the bridge loan and the SBA loan, said Kim Gordji.
The Gordjis praised their bank, FirstBank.
“We would never leave our bank because of what they did for us,” Kim Gordji said. “We were able to buy the building because of them.”
After the couple gave FirstBank their loan documents, “48 hours later, they said you are approved for 50 percent of the loan, and it took the SBA three months to get the 40 percent,” Ahmad Gordji said.
Kim Gordji said she advises her friends to “deal with banks and never deal with the Small Business Administration.”