The Small Business Administration’s stable of lending products has played a crucial role in giving local and regional community bankers opportunities to fund real estate deals or the expansion of local businesses during the economic recovery.
Brad Burdsall, owner of Egg Works and Egg &I Family Restaurants, said he secured two SBA 7(a) loans, valued at $3.6 million, to finance the opening of two new restaurants. He said two other loans, for another location and a warehouse, are in escrow.
The general small-business loans can be used to establish a new business or to assist in the acquisition, operations or expansion of an existing business.
“I turned to SBA loans because the deals require a 10 percent down payment compared with a bank, which would require 30 percent to 40 percent down,” Burdsall said. “The rates are good. I have a fixed rate for 25 years, that’s amazing. I know what my payments are, which is good for me.”
Burdsall said he would consider additional SBA financing as his business expands. Egg Works and Egg &I have six locations in Southern Nevada, with an additional three or four restaurants on the drawing board.
“I’d like to fill some holes locally, before I start looking outside of Nevada,” Burdsall said.
At Settebello pizza, a little more than $3 million in SBA 7(a) loans helped the company build its two locations in Las Vegas and six in Southern California.
Settebello co-owner Brad Otton said that unless owners are willing to give up a percentage of their business, SBA loans are the only route. Settebello opened its first location in Henderson in 2006.
“We were lucky,” Otton said. “We increased sales every year. While our clientele cut down on $100 dinners on the Strip, they weren’t going to cut out their $12 to $13 pizza. Our business increased during that time.”
Both Otton and Burdsall turned to Meadows Bank to secure their loans. Meadows Bank was the largest SBA 7(a) lender in Nevada in fiscal year 2012-2013 with $25.4 million in loans, with Nevada State Bank in second with $4.77 million in loans, according to the SBA.
“We certainly have done a lot of it,” Meadows Bank President and CEO Arvind Menon said. “We made the decision to get into SBA lending four years ago, at a time when conventional lending was very difficult.”
Menon said SBA lending fills that niche well. He said most customers already know whether they want an SBA loan.
“We’ll try to qualify them for a conventional loan,” Menon said. “If not, we’ll try to qualify them for an SBA loan, which allows us to take care of the customer.”
From October 2012 through Sept. 30, the SBA approved $29.6 billion in small business loans, nationwide down from $30.25 the year before and $30.5 billion in 2011. The number of SBA 7(a) and 504 loans inched higher to 54,106 this year, compared with 53,848 last year.
SBA 504 loans are business loans for the purchase of fixed assets, usually real estate, buildings and machinery, at below-market interest rates.
The SBA’s fiscal-year 2013 totals include almost 5,000 loans for nearly $745 million through the agency’s Small Loan Advantage program. These low-dollar loans are going to businesses and entrepreneurs in underserved communities.
The program, designed to expand access to loans of less than $350,000, was launched in February 2011 and revamped in June 2012.
In 2012, SBA significantly reduced paperwork for the program and expanded its pool of lenders. Among them was Plaza Bank, which has set aside $2 million to invest in small business in Las Vegas and Southern California.
Plaza Bank President Gene Galloway said he’s committed to funding $1 million in loans in Las Vegas. The loans will range from $5,000 to $50,000.
“This will help companies and businesses grow, create more jobs and make our regions healthier,” Galloway said. “It’s just the right thing to do. “
Galloway said the bank is reaching out to businesses through local organizations, personal connections and chambers of commerce. He said it was a priority to provide loans to underserved areas in the Las Vegas Valley.
“We want our local businesses to succeed,” Galloway said. “It’s good for them, it’s good for us, and it’s good for everyone in our regions.”
Contact reporter Chris Sieroty at email@example.com or 702-477-3893. Follow @sierotyfeatures on Twitter.