SBA 504 loans facilitate growth

Loan funds can be used to purchase land, buildings or equipment.

Many 504 loans are made through Rural Missouri Inc., a 504 CDC lender. RMI, according to the Springfield SBA branch office, was the No. 2 local lender in fiscal-year 2005 but ranked No. 1 in terms of dollar amount.

“At least up to 40 percent of your project costs can be on a fixed-rate loan for 20 years, and the rate is usually very competitive to the market,” said RMI Loan Officer Annette Darnell.

The SBA Springfield branch office had 46 504 loans from October 2004 through September 2005.

The SBA's most popular program is its 7(a) loan program, but Branch Manager Steve Aduddle said that the 504 program has its own advantages - namely its fixed-rate financing.

“(A 504 loan) gives a favorable rate, and it also mitigates credit risk because your private lender, and the community development corporation split the risk,” Aduddle said. “The borrower only has to come up with a minimum equity injection of 10 percent of the project. The fixed rate is for the duration, 20 years for real estate and 10 years for equipment.”

Jim Stout, owner of Engineered Packaging, has taken advantage of the 504 loan program.

In 2003, a fire destroyed the company, which converts foam into packaging, primarily for the automotive industry.

A combination of funds from a 504 loan and another loan enabled Stout to buy and renovate the former Springfield Seed Co. at 1350 E. St. Louis St.

“The reason we went with the 504 loan was because of the low, fixed rate,” he said.

Engineered Packaging, founded in 1991, now employs 67 people.

“The loan allowed us to grow … and to provide more jobs for the city at the same time,” Stout added.

The need for a new location for PaperWise also factored into Dan and Shelley Langhofer's decision to borrow money through an SBA 504 loan in 2001.

Shelley Langhofer said the company, which the Langhofers purchased in 2000 and moved from Salt Lake City to Springfield, outgrew its facility.

“Rather than lease additional space, we wanted to purchase our own space, so we bought an office suite in Woodhurst office complex,” she said.

“We chose this loan because of the lower interest, and the fact that it has a stable and consistent rate over a long period of time.”

Since then, the business has moved again, to a 20,000-square-foot facility at 3171 E. Sunshine, where about 30 employees design and develop document imaging and management software.

“One of the benefits of this loan was that we were able to borrow an additional amount of money and incorporate all of it into our built-in loan to take us to the next level of growth,” Langhofer said.

Largest 504 Loans in Springfield

October 2004–September 2005

$1,358,000

Headache Care Center

$1,312,000

Wingate Inn

$1,237,000

Golden Corral

$947,000

Garage Graphics and Visuals Inc.

$598,000

Engineered Packaging Inc.