Springfield Finance and Development Corp.

Loan No. 24, issued in late August to Dan Scott of Big Ugly Building LLC for $348,000, put the for-profit center city financing arm’s portfolio over the $1 million mark.

Scott is redeveloping the former Marquette Hotel at Jefferson and Walnut with a number of financing elements, including state and federal tax credits. Scott’s SFDC loan – the largest the community development corporation has issued in its seven years – provides him bridge financing until the federal tax credits are sold.

“The SFDC financing was critical for my project to help fund temporary financing until my tax credits can be funded,” Scott said. “With the project being divided up into six financing layers … one depends on the next for its success. This one is the third out of the six to go into place.”

SFDC loans usually serve as gap financing, essentially allowing developers to borrow greater amounts with less equity than they could through conventional means, said Brian Fogle, SFDC treasurer since its 1997 inception.

Fogle said the $1,275,409 loaned to date is recognition that the program, spawned by Vision 20/20, is working.

“We’re reflecting what we’re experiencing every day in center city, and that’s more deals, more investments and more activity,” he said.

But even more impressive is the amount of development leveraged by the SFDC loans, according to Brian Straughan, SFDC president and president of The Signature Bank’s East Sunshine office.

“We estimate an additional $9 million in other loans and owner investment, and more than 100 jobs created in center city, which probably would not have happened without SFDC,” Straughan said in a news release.

Downtown restaurateur Eric Zackrison has benefited from two SFDC loans while building his South Patton Avenue businesses: Agrario restaurant and Patton Alley Pub. He was approved for a $50,000 note in July 2002, which he used as gap financing for Agrario, and $75,000 last November to help fund construction at Patton Alley. Both are five-year notes.

Zackrison said SFDC gap financing is significant to restaurant startups because traditional financing is sometimes difficult to obtain for two reasons: restaurants have high failure rates and small profit margins.

“It is a small profit margin business, so you have to really know the business to succeed – or be lucky,” Zackrison said.

Two other restaurants – Parrino’s Deli, which went out of business, and Bruno’s, which is under development on South Ave. – have received SFDC financing. The majority of loans issued have been for office development.

This SFDC so far has issued a maximum of four loans a year. In 2004, the SFDC board has closed on two loans, however, several applications were not approved, according to Ann Peck, Springfield community loan officer.

$1 million challenge

While the $1 million milestone is a symbol of success, it also points to a new challenge: keeping up with demand, Fogle said. The problem is coming up with new capital.

The SFDC is owned by 11 Springfield financial institutions, which act as shareholders of the program. Those shareholders infuse the necessary capital – $300,000 initially and another $440,000 in a second capital call, Fogle said.

“We’ll never make enough money to self-fund it. We are always exploring ways to be able to get additional money,” Fogle said. “What we are doing now is borrowing. But there is going to be a limit to what we as bankers feel comfortable borrowing.”

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