CDC Small Business Finance

SBA lender enters Reno market

A California lender that specializes in Small Business Administration loans has won SBA approval to expand its operations into Nevada – and it’s targeting the Reno market.

CDC Small Business Finance, based at San Diego, began looking closely at the Reno market at the request of some of the banks with which it works to make SBA loans, said Michael Owen, an executive vice president with CDC.

Major banks often group northern Nevada with their northern California operations, he said, and CDC executives felt it made sense to do the same.

CDC, which is a not-for-profit organization, initially will serve northern Nevada from its Sacramento office, Owen said, although it ultimately hopes to open an office in the Reno area along with on in Clark County.

The lender specializes in SBA 504 loans, which generally are used by small businesses to purchase office or industrial buildings. Fixed-rate SBA 504 loans finance 40 percent of the price, a bank or other lender finances 50 percents, and the owner puts 10 percent down.

That lending program has remained popular despite some banks’ growing caution about real estate lending, Owen said. Banks that want to limit their exposure to real estate lending can use the SBA program to meet the needs of their customers without loading the entire loan onto their own books.

Nationwide, Owen said the dollar volume of SBA 504 loans is running about 8 percent ahead of figures from a year ago.

In 2006, CDC Small Business Finance handled more than 700 loans totaling about $1.3 billion. It serves markets in Arizona as well as California and Nevada.

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Profiles of Lenders Specializing in Small-Business Finance

SPECIAL REPORT: The new world of SBA lending

CDC Small Business Finance

Key Executive: Mike Owen, executive vice president

Started SBA Lending: Opened Los Angeles offices two years ago.
2006 SBA Loans: 222
Average Loan Size: $750,000
Minimum Loan Size: $125,000
Loan Types: 504 real estate is primary product. 7(a) loans packaged under affiliate programs.

Niche: “The 504 loan is a real estate lending program. We focus on businesses that are moving from a leased facility to ownership through natural growth of their company. This product allows newer companies, who may not have an established track record, to secure funds. We extend capital to small businesses that might not receive the same type of credit terms on a traditional loan.”

Competition: “The challenge in Los Angeles is to understand the lending environment and the potential uniqueness of properties in the L.A. areas. The SBA opened up territories for community development corporations two years ago, which allowed us to expand into Los Angeles. We were a non-existent entity three years ago locally.”

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CDC SMALL BUSINESS FINANCE APPROVED TO OFFER SBA MICROLOANS IN INLAND EMPIRE

Small businesses in Inland Empire that have struggled to get conventional bank financing can now apply for SBA microloans through CDC Small Business Finance.

Loans up to a maximum of $35,000 are available for businesses needing working capital or cash to purchase equipment and fund other needs. Approved businesses also receive free technical assistance with marketing, planning, accounting and other functions upon request.

“Our mission is to champion economic development via diverse lending programs that help emerging and small businesses grow and create jobs,” said Robert Villarreal, senior vice president of community development for CDC Small Business Finance. “SBA microloans offer a way to help the smaller entrepreneur.”

To date CDC has provided over $800,000 in SBA Microloan financing to small businesses in Southern California.

The SBA Microloan program requires small business owners to have positive cash flow, reasonable credit, good character and sufficient, demonstrable experiences to operate the enterprise. Start-up businesses are considered on a case-by-case basis.

CDC Small Business Finance has a variety of SBA and community lending programs, offering financing from $5,000 to $250,000.

For information on applying for an SBA Microloan, call 800-611-5170.

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7/17/2006

SBA Loan Program Rockin’ for Area’s Small Businesses KRC Rock Doubles Employee Count With Move to New Headquarters

By Mike Allen

The folks at KRC Rock Inc. in San Marcos, which sells natural stone and boulders, got help financing the construction of their company’s new headquarters. The money came from a federal loan program targeting small businesses just like KRC.

“We just about doubled in size to 58 employees after we moved,” said company Controller Cathy Gordey. “We had been leasing the former property from the city but we had to get out at some point because they were going to build a commuter train line on the site.”

CDC Small Business Finance, a local nonprofit that packages loans for acquiring existing properties or building new facilities, loaned KRC Rock $1 million. California Bank & Trust funded half the amount, with KRC Rock contributing 10 percent as a down payment.

The loan was orchestrated through the U.S. Small Business Administration 504 Program, which requires 40 percent of a loan be provided by nonprofits such as CDC Small Business Finance, 50 percent provided by banks and 10 percent from the borrowing businesses.

KRC Rock now occupies two buildings on 4.5 acres off Twin Oaks Valley Road near Cal State San Marcos.

The larger of the two houses the company’s headquarter offices on the second floor and a retail/warehouse area on the first floor. The other building is used for inventory, Gordey said.

KRC Rock’s new construction financing differs from many recent loans made in San Diego because most are used to acquire owner-occupied real estate, said Kurt Chilcott, CDC’s president.

“Most borrowers are either acquiring or expanding their existing buildings, rather than using the funds for new construction,” Chilcott said. “There isn’t that much in terms of new inventory going up compared to what’s happening in the Inland Empire. There we see a lot of new construction because it’s a newer area.”

Loan activity was up for the first nine months of the CDC’s fiscal year, which started Oct. 1, Chilcott said.

The CDC provided $89.5 million, up 16.5 percent from the first nine months of the 2005 fiscal year.

The number of borrowers increased to 132 from 104, said a CDC report.

While 504 loans can be made for as much as $4 million for manufacturing businesses, and up to $2 million for other industry types, most are much lower, Chilcott said.

“Our average loan is probably about $600,000.”

The average borrower is a small business that has occupied its property for several years and wants to own instead of lease. To qualify, the business cannot have net assets of more than $7.5 million.

Businesses must show that the loan will create new jobs. For the first nine months of this year, the CDC said 1,074 new jobs would result from the loans made by the 504 program.

Chilcott cautioned that the numbers are based on projections — not what has actually been created. He said the projection of new jobs pretty much matches the actual number of new jobs generated, based on surveys taken two years later.

CDC Small Business Finance has been one of the largest 504 lenders in the nation for several years. Last year, CDC boasted a record-breaking year, making 600 loans throughout Southern California with a total loan value of $440.7 million.

In addition to providing 504 loans, CDC makes micro-loans of up to $50,000, as well as other SBA-backed loans.

The 504 program differs from the SBA’s 7(a) program in that its funds can be used to either purchase real estate or construct new facilities. The 7(a) loan can be used for financing inventory and working capital needs, as well as real estate purchases or construction.

The program has helped a lot of fledgling businesses that would not have been able to qualify for a conventional business loan from a commercial bank, Chilcott said.

“We’ve helped all sorts of different businesses, but we tend to do a lot of loans to professional offices, and service organizations that include restaurants, gas stations, retailers and grocery stores,” he said.

And rock retailers, too.

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Daily Business Report
May 23, 2006

Kurt Chilcott, president and CEO of San Diego-headquartered CDC Small Business Finance, has been re-elected chair of the National Association of Development Companies. NADCO, based in Washington, D.C., provides legislative and regulatory support for the Small Business Administration's 504 program that offers companies access to capital for expansion, particularly purchasing commercial real estate. CDC Small Business Finance is a lender of SBA fixed-rate, commercial real estate loans. The nonprofit company has offices in San Diego, Santa Ana, Pasadena, Sacramento, the Inland Empire and Phoenix.
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SBA recognizes CDC Small Business Finance as 504 Lender of the Year

By ERIK PISOR
Wednesday, April 27, 2006

The U.S. Small Business Administration awarded on Wednesday the CDC Small Business Finance of San Diego with the 504 Loan Lender of the Year at a luncheon award ceremony at the SBA Expo in Washington D.C.

CDC Small Business Finance serves the capital needs of businesses throughout California and has funded more than $1 billion in SBA 504 loans for thousands of small businesses. CDC SBF also works with nearly 100 private lenders, with current volume more than double that of the next CDC. In 2004, it made 586 SBA 504-CDC loans amounting to $358.7 million.

“Our partnership with lenders like Bank of America and CDC Small Business Finance is key to providing small businesses the financial resources they need to grow and strengthen our economy," said Hector Barreto, SBA administrator, in a statement. Honoree for the award was Kurt Chilcott, president and CEO of CDC Small Business Finance.

The criteria for selecting the winners included the volume of SBA-backed loans made, but the SBA's primary focus was to recognize lenders that have shown steadfast commitment to supporting the growth and expansion of small businesses across the country, even beyond the scope of SBA loans.

The SBA also recognized Bank of Granite of Granite Falls, N.C., and Wilshire State Bank of Los Angeles as the top export lenders, and for the second straight year Bank of America of Charlotte, N.C., was recognized as the top small-business lender in the nation.

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January 27, 2005

Robert Villarreal, a past president and chief executive of the San Diego County Hispanic Chamber of Commerce and former market development manager for Bank of America, has joined San Diego-headquartered CDC Small Business Finance as senior v.p. of community development.

Villarreal oversees CDC's community development initiatives, including community loan programs, government relations, community outreach, community partnerships and the Arthur H. Goodman Memorial Scholarship Program.

Villarreal, 41, left the Hispanic Chamber in June 2003 to go to Bank of America.

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About CDC Small Business Finance

Founded in 1978, CDC Small Business Finance is a not-for-profit organization committed to serving the capital needs of small businesses in San Diego, Orange, Riverside, and Imperial counties. CDC is the largest of over 260 Certified Development Company's nationwide working with the U.S. Small Business Administration to provide financing for small businesses. CDC's economic development mission is to assist small businesses in all communities to expand and create jobs.
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