Center city loan portfolio tops $2.4M

A $45,000 May loan to Springfield small-business owner Jay Hickman marked the Springfield Finance & Development Corp.’s 40th loan and pushed the center city financier’s portfolio to $2.4 million.

The loan program developed by Urban Districts Alliance celebrated its 15th anniversary in June.

Hickman, co-owner of Ernie Biggs piano bar and an agent for Connell Insurance, has leaned on the city loan program in the last year for $90,000 to fund improvements at two downtown properties. Earlier this year, he completed façade and interior renovations at Ernie Biggs on South Avenue, and he’s now improving the vacant Three Sisters Building on Park Central East to land a tenant.

Hickman, through EB Management Co. LLC, plans to lease the 6,000-square-foot property to business associate Randy Gildehaus, co-owner of Big Whiskey’s and Dublin’s Pass though English H.L. LLC, for an undisclosed amount. Gildehaus, who shares a McDaniel Street office with Hickman and entrepreneur Paul Sundy, said Hickman’s building would be home to a bar tentatively called Vintage Nightclub, set to open in October.

SFDC President Dana Elwell, a senior vice president with Guaranty Bank, said SFDC is an option for individuals focused on growing their businesses but who may have struggled to secure adequate funding from traditional sources.

“(Business owners) may have gone to a regular bank that says, ‘We can loan you this much, but we can’t loan you more than that.’ So, they may come to us, and we can make that bridge loan between what they’re needing and what a bank can do,” Elwell said. “We don’t normally make the full loan, although we can.”

Elwell said the organization that was formed to support economic development in the downtown area currently has $120,000 on-hand to loan, and it could borrow more should the need arise. There are currently 11 active loans.

Each of Hickman’s loans has seven-year terms at 6 percent interest. Hickman said he was made aware of the loan program after talking with UDA officials last year.

“It was a better interest rate, so cheaper money, and I hate to say it, but they were easier to work with than going through a traditional bank during these times,” Hickman said.

Interest rates vary, according to UDA Executive Director Rusty Worley, depending on the current lending environment, applicant credit history and the quality of the proposal. He said an applicant today could expect a loan with around 6 percent interest, or slightly less than what many local banks offer for business loans.

Worley said SFDC was created as an extension of the late 1990s strategic planning platform Vision 20/20. City leaders, Worley said, identified gap financing as an issue preventing business owners from investing in the center city area.

With tax credits available for banks that provided loans for urban revitalization projects, local banking partners had an incentive to support the initiative, Worley said. He said roughly $500,000 in tax credits is still available for investors.

Ann Peck, community development loan officer with the city of Springfield, is the face of the SFDC for many loan applicants. She guides business owners through the loan process, accepts applications and disperses funds when loans are approved.

Peck described SFDC as the financing component for the UDA, whose mission is to support business growth in Springfield’s center city.

SFDC’s 15-member board, which comprises 13 banker representatives – one each from its financial partners – and two individual business owners, approves the loan applications, Peck said.

“A lot of times, the banks refer customers to me, but sometimes, the referrals come from Urban Districts Alliance. And then sometimes, referrals come from people interested in the city small-business loan program, which I also manage,” Peck said. “For instance, right now, the city is out of funds for that program, so I’m recommending them to the SFDC because it still has funds available.”

Peck said SFDC loan applicants must be investing in projects within a specific geographic boundary: Grand Street to the south, West Bypass to the west, Kearney Street to the north, and Glenstone Avenue to the east.

“I do all the underwriting like a bank would do. I’m reviewing [applicants’] tax returns and business plans … and then I prepare a loan proposal,” Peck said. “Since we have 15 board members, we usually just meet by conference call to discuss the projects.”  

With loans to such business as The Moxie, The Bar Next Door and SignalPoint Asset Management, Peck said amounts have ranged from $8,000 to $348,000. Elwell said SFDC loans are typically short-term loans, around five years in length, and payoffs provide the funding for additional loans.

Peck said SFDC has only had one loan loss of less than $5,000 from a bar that shut down.[[In-content Ad]]