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From left to right are Wendy Horton, Pizza Inn manager; Viren Patel, co-owner; and Krish Patel, co-owner. The restaurant is set to open the second week of September. Greg Beckner/Staff
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Their slice of the SBA pie
Local business owners take advantage of stimulus plan loans
Published: Sept. 3, 9:40 a.m.
When Viren and Mina Patel wanted to add a second Pizza Inn in Boiling Springs to their successful one in Spartanburg, they went shopping at banks in town for a loan.
“I was looking at a project from the ground up, and not a single bank would look at me,” said Patel, a pharmacist at Rite Aid in his day job.
Despite excellent credit and a good track record with his Pizza Inn at 8151 Warren H. Abernathy Highway on Spartanburg’s west side, Patel said the bankers didn’t want to take the risk.
Finally, he said, he secured funding through a special program of the Small Business Administration under the Obama administration’s American Recovery and Reinvestment Act to stimulate lending and generate jobs in the small business sector.
The temporary program shields banks from all but minimal risk, and it waives the fees SBA charged under normal economic conditions and which, as borrowers sometimes saw it, negated the cost-savings the lower interest rates banks would charge on SBA loans.
In Patel’s case, Regions Bank granted an SBA-guaranteed loan of $293,000 for start-up and operational costs, and the non-profit Certified Development Corp., working with the SBA, provided $302,000 in long-term financing for the land, building, renovations and other physical improvements.
The Patels, who operate their Pizza Inn franchise under AK Concepts of Spartanburg, have invested more than $1 million in the Boiling Springs location that, until last August, was home to another Pizza Inn under different ownership.
Patel bought the real estate in a bankruptcy sale and spent $200,000 gutting and rebuilding. He was scheduled to open the restaurant this week, which, he said, could not have happened without the SBA’s assistance in encouraging banks to lend.
“The only way the bank was willing to give us money is with the SBA guarantees,” said Patel. “If something happens – knock on wood – the bank is going to get their money back.”
Because of the program, he said, the Pizza Inn will add 40-45 new full and part time jobs and contribute an annual payroll in excess of $200,000 to the local economy. That does not include the jobs generated by construction, site enhancement and purchased equipment and furnishings.
Under the recovery provision, the guarantee to banks on SBA-backed loans was temporarily raised from 75-85 percent to 85-90 percent and closing-cost fees that ranged from $200 to $50,000 were suspended.
When Dana Williamson, who with her husband owns Elgin Williamson body shop on Pendleton Street in Greenville, sought to consolidate some debt, she went to the company’s banker for 20 years, the Bank of Travelers Rest.
Tom Britt, senior vice president, worked out a SBA-guaranteed loan in six figures that Williamson said gave the company “a little breathing room while things are in recovery” by lowering their expenses and overhead. Waiver of the SBA fee saved the company $10,000.
Williamson told an SBA-sponsored news briefing last week that while the family business has remained strong, customers “worried about whether they are going to be able to pay for their groceries” are slow to pay their repair bills.
Bank of Travelers Rest, a privately held community bank that has remained profitable through the financial collapse, has a long history of participation in the SBA program and because of the more generous terms now has 14 loans in the pipeline or closed.
Of the 28 SBA loans approved for Greenville County businesses between Feb. 17, when the recovery act went into effect, and Aug. 24, Travelers Rest wrote four, second only to BB&T’s five. Travelers Rest was responsible for one of 10 loans in Spartanburg County.
In pre-recession times, Britt said, the bank steered borrowers to the SBA “100 percent of the time.
However, with this increase in the guarantee, no fees and alternate loans … it’s not uncommon for us to get calls from a customer” inquiring about the program.
In the first six months, the SBA says $5.7 billion in loans were approved nationwide, creating 77,000 jobs. In South Carolina, the SBA guaranteed 189 loans for $50 million and helped create 518 jobs, said Theresa Singleton, deputy district director. Businesses saved $1.3 million as a result of the elimination of fees, she said.
In the counties of Greenville, Spartanburg and Anderson, in the first six months, 40 loans totaling $14.2 million resulted in creation of 135 jobs and saved small business owners $365,000 in fees, Singleton said.
Since then, Singleton said, the pace picked up in July and August with 78 loans statewide worth $20.4 million and 20 loans worth $7.5 million in Greenville, Spartanburg and Anderson counties. During the same period last year, she said, “we only did 11 totaling $3.5 million. We are back to where we want to be.”
Although participation of most community banks has not lessened, she said, some of the major banks remain unable or unwilling to free up capital for loans, SBA-backed or otherwise. Still, she added, participation is approaching pre-recession levels in the state.
Greenville’s The South Financial Group, which has not had SBA loan units in its Carolina First and Mercantile Bank operations in the Carolinas and Florida, last month hired an experienced SBA lender to put SBA units in all TSFG’s markets within six months.
It’s “spot on” to conclude that TSFG recognizes that it needs to step up its participation in SBA programs to assist small businesses, said Richard Bradshaw, who was named executive vice president and director of SBA lending in mid-August.
“That’s why I’m here,” he said.
In his prior position as president of UPS Capital Business Credit in Atlanta, Bradshaw oversaw a tripling of SBA loans and moved the company from 45th to 10th nationally in SBA volume.
Like others in the industry, Bradshaw would like to see the temporary stimulus programs of the SBA to last beyond the end of the year.
Congress gave the SBA $730 million for the recovery program. Half of that amount is for backing the type of loan Williamson got to consolidate the auto shops debt and to suspend loan fees; $275 million is for guaranteeing the kind of loan Patel got for the land, building and construction of his new Pizza Hut.
For every loan it guarantees, SBA puts aside a small amount based on calculations of risk over the period of the loan. The funds set aside for suspension of fees makes up for revenue SBA normally uses to make loan programs self-sustaining.
A spokesman for the SBA in Washington said the SBA’s recovery program is authorized until Sept. 30, 2010, but the agency estimates it will have used up the allotment for guarantees and fee waivers by the end December, if not by the end of November.
Singleton, of the SBA’s South Carolina office, said the agency anticipates that Congress will be asked to fund the program again.
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