When it comes to borrowing money for a business venture, don't give up just because the first banker you talked to said no.
Speakers delivered that message to entrepreneurs and others attending a
Thursday evening PubTalk economic development gathering at Mad
Matilda's coffee shop and restaurant in downtown Baker City.
When an entrepreneur is short of cash or other capital to qualify for a
conventional business loan to launch a new business venture, help might
be available to turn the initial no to a yes, by tapping into a variety
of government loan guarantees, direct loans and grants targeting rural
areas, said LaDonn McElligott of the USDA Rural
Development office in
Baker County."The USDA Rural Development Business and Industry program has
guaranteed loans for small businesses that can help people get loans
from their lender," McElligott said.
"If you can't get a loan from the local bank, you can ask your bank to
come to us for a loan guarantee," McElligott said. "We can guarantee 70
to 80 percent, depending on the size of the loan."
She said that guarantee is often enough to meet the capital equity of the down payment requirement for a startup or business loan, provided the business plan and other factors are good enough to justify the loan.
Rick Minster of the Oregon Economic Development Department's regional office in John Day, said entrepreneurs interested in starting or expanding businesses in Baker County have a big advantage over people in other areas because Jake Jacobs, Gene Stackle and other local economic development officials have put together a team of business plan experts to help develop and write successful business plans.
"They have the skills and knowledge to help you get through the business planning process," Minster said.
He said gap financing and loan guarantees are available through OECDD for all kinds of business startup or expansion programs targeting economically distressed communities like Baker City.
"We really try to help businesses in distressed rural communities," Minster said. "We can do any type of project. If you are in downtown Baker City, we can look at loan guarantees or direct loans, when we have a problem getting banks to participate."
"We're always looking for cutting edge business ventures where people plan to produce and sell a product."
After listening to Jacki Adams describe the phenomenal success of a high quality fudge she and her husband, Lance, are marketing locally, by mail order and via the Internet since they purchased the Sycamore Tree gift and candy shop in Baker City, Minster said that's exactly the type of product OECDD likes to loan money to help them grow and hire more employees.
Adams said after purchasing the businesses in 2007, she and Lance initially focusing on remodeling and other improvements, as well as logging 25,000 gift items into the store's point of purchaser computer program. Then they dove head long into developing and promoting sales of their own special recipe fudge.
So far this year, fudge sales are 10 times what they projected for the year, Adams said.
While the business has a strong focus on local sales, Adams said 60 percent of sales come from out-of-town visitors who come into the store, a mailing list of more than 3,600 customers, as well as a growing sales volume from the Sycamore Tree Web site, which currently provides information on how to order fudge or other items by phone, mail or e-mail.
While they're working on updating the Web site to take Internet orders online, Adams said business is growing to the point they'll need $40,000 for another fudge vat, Web site improvements and the hiring of another employee to make fudge.
"This fudge business is something that could really take off," Minster said. "I'd like to help them get 10 vats and hire 15 employees."
Other successful new business operators making presentations at the PubTalk included Loretta Hewitt of Sha-Schevelle salon, and Cindy Indicott and Joy Berryhill of Oregon Trail Events.
Hewitt said government loan programs helped her secure financing to start her full service salon specializing in skin care, nails and hair.
After making a move to the coast, where she completed beauty school, Hewitt said she couldn't wait to return to Baker City to start her own business.
Like the character Dorothy from the Wizard of Oz, Hewitt said, "I kept clicking my heels and saying 'there's no place like home.' "
Ever since she got her wish and returned to Baker City to open Sha-Schevelle salon, Hewitt said she has been living a dream.
"My business is giving to others. The greatest gift I get is people leaving happy," Hewitt said.
At Oregon Trail Events, Indicott and Berryhill found success by providing events management services.
"We have managed two events so far, and as a result of those events, we will be handling all the food vendors at Miners Jubilee, and we recently got a call from the Harvest Fair in Union County and will be handling vendors for that as well," Indicot said.
Berryhill said vendors can arrange for booths to sell everything from food, art, jewelry, clothing and other products to business services.
One of their upcoming events is the Winter Wonderland gifts, crafts and art show coming up Nov. 15 from 9 a.m. to 4 p.m. at the Nazarene Church, 1250 Hughes Lane, Baker City. For information on vendor space call Berryhill at 519-2935 or Indicott at 519-2612.
To keep busy when they aren't lining up vendors for the events they're managing, Indicot and Berryhill said they are also available to conduct estate sales.
"All we're interested in is helping you become a success," Russ Butler of the Small Business Administration in Boise told those attending last Thursday's PubTalk.
"The most important thing to remember about the SBA is that the amount of collateral does not determine the amount of the loan," Butler said. "Your ability to repay the loan is the key."
The business plan presented by would-be business borrowers is one of the principle documents SBA officials and bank lenders use to assess an individual's ability to repay a loan.
However, if the business plan and other details look good, Butler said the SBA can fill in the collateral gaps by providing loan guarantees to banks of 15 percent to 20 percent.
"SBA helps new or existing businesses," Butler said.
Several presenters praised Old West Credit Union and Community Bank during the PubTalk for their aggressively pursuit of government backed and guaranteed loans to help local entrepreneurs, farmers and ranchers launch and expand local businesses in Baker County.
"Our of our $40 million loan portfolio, $21 million utilize these programs," said Jeremy Gilpin, a senior loan manager and vice president with Community Bank in Baker City. "We are having our most profitable year in history. We've had a 700 percent growth rate the past three years."
He said the government backed loans and tax credits available to help rural businesses is not free money. It has to be paid back, but the programs allow them to keep more of their money and use less of their cash up front for a down payment or collateral on a business loan.
While some of the nation's largest mortgage lenders and commercial banks have gone broke or are on the verge of going broke, Deryl Leggett said Old West Federal Credit Union is having one of its best years with a 20 percent growth rate last year.
Leggett said one thing Old West Federal Credit Union and Community Bank have in common is their commitment keeping local deposits invested in the community.
Unlike some "big box lenders" that make loans based on credit scores, Leggett said the loans at the local credit union are made based on the character of the individual, their bill-paying history and extenuating circumstances, such as medical problems, which affect most people at some time in life.
State Rep. Greg Smith, who works for the Northeast Oregon Economic Development District as a day job, said picking the right bank is one of the most important decisions a business makes.
"In choosing a lender, do you want someone who is sitting in the bank making decisions, or someone who comes out to see the business and learn about what you are doing?" Smith asked.
"I enjoy lenders who are very creative," Smith said. "Find out what lenders are out there who will be creative and help you get where you want to go."
Working with creative lenders who are willing to do the extra paperwork and go the extra mile to help a business get the money they need to start or expand a business had a hand in approvals for nearly $2 million in gap financing in Baker County through partnerships between local banks and the Northeastern Oregon Economic Development District during the last 18 months, Smith said.
"What I hope entrepreneurs get out of tonight's meeting is how important it is to work with lenders who are flexible and creative," Smith said.