Highway contractors, small businesses first in line for federal dollars

Cash-strapped small businesses and work-hungry highway contractors should be the first beneficiaries of federal stimulus money that's slowly but surely finding its way to the Ozarks.

On March 16, the U.S. Treasury unveiled the initial stages of a plan designed to unlock credit for small-business owners facing a dearth of financing options. The U.S. Small Business Administration is a central cog, and modifications to the agency's government-backed loans are expected to catalyze local lending.

Furthermore, the Missouri Department of Transportation has mobilized to allocate more than $630 million in stimulus funds for highway and bridge improvement projects throughout the state. But contracts already awarded for 37 projects totaling $91 million - including some in southwest Missouri - are in limbo as state lawmakers debate how to collect and disperse stimulus money.

Senate Bill 313, sponsored by state Sen. Gary Nodler, R-Joplin, and awaiting Gov. Jay Nixon's signature, would require Missouri's share of the $787 billion American Recovery and Reinvestment Act to go through the state treasury. In the past, federal money for state transportation projects has gone straight to MoDOT.

MoDOT Director Pete Rahn told the Associated Press earlier this month that continued legislative wrangling could jeopardize the first round of projects. Half of MoDOT's stimulus money must be obligated by June 30, and all of the federally funded transportation projects must be completed within three years.

At a special meeting March 19 at the Springfield Area Chamber of Commerce, the Missouri Highways and Transportation Commission approved a list of 87 MoDOT projects totaling $577 million to be funded by stimulus money.

Stimulus or stopgap?

Leo Journagan Construction Co. immediately sunk its teeth into southwest Missouri's slice of the stimulus pie.

The Springfield-based highway construction contractor won contracts totaling $14 million for six regional transportation projects, including the widening of U.S. Highway 60 between Republic and Monett as well as several road-resurfacing jobs.

The rush of work means Journagan could rehire as many as 195 employees facing extended layoffs, said Vice President and Treasurer John View. And while that's good news, View remains concerned about the state's long-term transportation funding crisis.

In recent years, MoDOT has spent roughly $1 billion annually on transportation improvements, View said. This year, that spending would have dropped to about $500 million without the federal stimulus infusion, he added.

"That money puts us at the status quo, and it's for slightly over a year," he said.

If Congress doesn't reauthorize the federal highway bill this year, MoDOT will again face funding struggles once the stimulus spigot is closed, View said. Payments on $2 billion in bonds issued under Amendment 3 begin this summer, and state gas-tax receipts have dropped as a result of lower fuel consumption.

Meanwhile, area contractors are preparing for a highly competitive bidding environment as MoDOT continues to let bids on projects propelled by stimulus money.

David Roling, who manages the Springfield branch of Emery, Sapp & Sons Inc., said the Columbia-based contractor expects to bid on numerous "shovel-ready" projects in southwest Missouri and elsewhere in the state. Open lines of communication with architects, engineers and government employees are vital to tracking opportunities, Roling said.

"The available work does not fall in your lap," he said. "No one's going to call you on the phone and say, 'Here's a project, and I want you to bid on it.' ... We've all increased our marketing efforts. We've increased our efforts to promote ourselves."

Journagan's View had a similar perspective.

"Competition has been keen," he said. "We all try to keep sharp pencils and find ... our competitive edges."

Journagan and ESS are both expected to bid on another major project fast-tracked by the federal stimulus - the six-laning of U.S. Highway 65 between U.S. 60 and Interstate 44. That contract could be as much as $38 million, said Jim Anderson, who sits on the Highways and Transportation Commission.

Giving businesses credit

Another facet of the federal stimulus bill signed by President Obama last month seeks to jump-start small-business lending through the SBA.

Under the plan, loans available through the SBA's 7(a) program - its most popular - are now up to 90 percent guaranteed by the government, said Walter Cowart, who manages the SBA branch office in Springfield. In the past, Cowart said the SBA guaranteed between 75 percent and 85 percent of the total loan amount, with larger loans carrying smaller guarantees.

"The advantage there will actually go to the bank, because the bank will be induced to make a loan at 90 percent that the bank may not have made at 75 (percent)," he said.

The 90 percent SBA loan guarantee should have a discernible impact on local commercial loans, said Rayanna Anderson, director of the Small Business & Technology Development Center at Missouri State University.

"That will hopefully open the banks' lending policies, and they will start doing some deals," she said.

"Banks have to loan money. ... That's how they make money."

With the typical small-business loan at about $250,000, Anderson noted that commercial lending is one of banking's more profitable product lines.

In tandem with higher loan guarantees, the Treasury has temporarily eliminated upfront fees associated with the 7(a) loan process, Cowart said. Borrowers previously paid fees as high as 3.75 percent for larger loans.

"For the last 30 years at least, the small-business applicant has had to pay thousands of dollars - depending on the size of the loan - to get the guarantee affixed to the bank's loan," Cowart said. "That money that would traditionally come out of the funds loaned to the small business will now be available to the small business."

Another new product in the works - although not yet available - is a maximum $35,000 loan for businesses that are up to six months past due on an existing loan, Cowart said. The loan is 100 percent guaranteed by SBA, and the first payment is not due for a year, he added.

Cowart's advice to local businesses in dire need of credit: "Go to your bank and talk to your commercial lender, because they now have these added arrows in their quivers to induce them to make a loan they might not have made last week."[[In-content Ad]]