SBA branch sets lending record

Using an SBA loan, Blake and Debbie Souter purchased the Ozark business in December 2004.

“It was going to close,” said Blake Souter, who bought the business after the previous owners downsized the staff from about 20 to eight.

The Souters, who borrowed $465,000 for the purchase, bought 16-year-old Covenant Manufacturing from Ron, Karen and Ronnie Dodd with the help of a U.S. Small Business Administration loan.

The Souters’ loan is one of 484 loans that helped the SBA Springfield branch office set a record of more than $98 million in loans during the 2005 fiscal year, which ended Sept. 30.

“SBA and their guarantees (helped to) save jobs and kept the business running,” Blake Souter said.

Covenant Manufacturing, 1326 W. Liberty, in Ozark, has expanded operations and now employs 17.

“Without SBA,” Souter said, “there would not be the small-enterprise business professional.”

Steve Aduddle, SBA Springfield branch manager, said the 484 loans guaranteed through the local office in FY 2005 matched the 2004 total number of loans, while the $98 million awarded beat the previous record, from 2004, by $2 million. The record number of loans guaranteed through the Springfield branch office is 540, set in 1995.

Aduddle said SBA loans are awarded for a multitude of reasons: increases in working capital, equipment purchases, inventory expansions, real estate acquisitions and building construction or renovation.

Aduddle’s region encompasses 28 counties in southwest Missouri. He said Greene County businesses were awarded the most loans with 143 that amounted to $27.4 million.

Nationally, Aduddle said, the SBA had a FY 2005 budget of $22.8 billion and approved over 100,000 loans for $20.2 billion. For FY 2006, he said, SBA has been allotted $24.5 billion.

“The SBA is ... a very cost-effective organization,” he said. “When the taxpayers spend money with us, we create something for it.”

The “bang for their buck,” Aduddle said, is job growth and an increased tax base.

Locally, Aduddle said, 3,517 existing jobs were affected and 846 jobs were created by SBA loans. Nationally, he said, 796,141 jobs were impacted in FY 2005 by SBA loans.

He said both nationally and in Missouri, small businesses supply half of the existing jobs and 75 percent of the new jobs.

Aduddle said banks approach the SBA when they deem loans too risky to issue on their own.

If the SBA approves the loan, it guarantees between 75 percent and 85 percent of the loan’s value in order to take much of the risk away from the banks.

Locally, Aduddle said, 94 percent of SBA debtors are current on their loans.

“If it’s a solid account, (banks) don’t need the SBA,” Aduddle said. “We don’t want to use up our money guaranteeing sweet deals.”

Mike Mattson, senior vice president of commercial loans at Liberty Bank, handled the Souters’ loan. Mattson said Liberty Bank couldn’t issue the loan on its own because Covenant Manufacturing’s collateral – church furniture – had a limited market in case the bank had to seize and sell the property.

“Using the SBA guarantee for that type of collateral … made that situation possible,” Mattson said. “It’s worked out very well for Blake and Debbie.”

“We want to help the guys who are getting started, who are trying to grow,” Mattson added. “Otherwise, it’s a big business and they don’t need us.”

In return, he said, banks pay processing fees to the SBA – between 0.25 percent and 3.75 percent of the amount guaranteed by the SBA – and must adhere to loan ceilings of either 2.25 percent or 2.75 percent over lowest prime rate, depending on the loan’s maturity term.

For the eighth consecutive year, Liberty Bank was named the No. 1 small-business loan producer in Southwest Missouri, producing 83 SBA loans totaling $19,047,800 to businesses in 17 southwest Missouri counties. Liberty Bank has previously earned No. 1 Small-Business-Friendly Bank and Outstanding Lender honors from SBA.