SFDC to change loan structure

by Karen E. Culp

SBJ Staff

When the Springfield Finance and Development Corporation got ready to issue its first loan in January 1998, it was ready to infuse capital into ongoing center city revitalization.

What it found was that it needed better prices for its loans.

"We had to listen to the marketplace and position ourselves to be willing to consider each deal individually, and that meant looking at our pricing structure," said John Owens, president of the SFDC board.

Nine local banks came together to raise $300,000 for the SFDC, a financing vehicle for center city projects. Since January 1998, the corporation has issued about $75,000 in loans to three different center city developers. Though encouraged by that amount of business, Owens said, the group is "not satisfied with that. We want to issue another $100,000 worth of loans by the end of the year," Owens said.

Its early loans were probably priced at 2 percent to 3 percent above the prime rate, said Joe McCarty, SFDC board member and senior vice president of Empire Bank.

"Now, we're talking about pricing loans under prime, maybe by as much as 1/2 to 1 percent. That by itself might not be the only factor in someone's decision to pursue a loan from us, but it may be a significant factor," McCarty said.

SFDC announced May 25 that it will be issuing the lower-rate loans, and that it will pair with Urban Districts Alliance to locate potential candidates for loans. The loans have typically been gap financing loans, Owens said, loans that would help a project along, but not necessarily provide its sole funding. He added that the group wants to expand its purpose.

The SFDC can provide loans of $5,000 to $75,000. Higher loans can be provided on an exception basis, Owens said. The area of eligibility is bounded by Kearney, Grand, Glenstone and West Bypass.

Owens said the advantage for the participant banks is in assisting with their community's growth.

"Banks generally grow and prosper when their communities grow and prosper. I think this is a long-term investment for them," Owens said.

Owens is also executive vice president in charge of commercial lending for Commerce Bank, which is a participant bank along with Citizens National, Empire, Great Southern, Guaranty Federal, Mercantile, Metropolitan National, Bank of America and Union Planters.

Though the group is still working on using its first $300,000 of capital, Owens said he is confident that the SFDC will be able to attract additional capital when it is needed.

"We're hoping to attract community-wide interest. I don't think additional capital will be a problem," Owens said.

Mike Lawson, first vice president of Great Southern, said his bank, which has a presence on South Street, is eager to see the center city area grow.

"I think we have recognized the benefits we could achieve by a thriving downtown area," Lawson said.

He added that he hopes the gap loans will help some businesses open their doors earlier than they had planned, or help complete some projects that could not have happened without the SFDC funding.[[In-content Ad]]