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Banking & Finance

Lender Event Highlights Government Loans

By Jenny Callison, posted May 3, 2019
After Hurricane Florence, Wilmington restaurant Indochine used a Rapid Recovery loan from Thread Capital to pay for tree removal, clearing the way for reopening soon after the September storm. Photo courtesy of Indochine
Surveying the damage after Hurricane Florence last September, Indochine owner Solange Thompson found herself with a functional restaurant but severely compromised access to the building.

Large fallen trees littered the parking lot and impeded access to the building. She contacted FEMA, and officials there referred her to Thread Capital, a relatively new organization that is part of the N.C. Rural Center.

Through Thread Capital, a private, non-profit lender, Thompson was able to secure a Rapid Recovery loan that covered the cost of having the trees removed. As a result, Thompson was able to reopen Indochine six days after the storm passed.

At the recent inaugural Lenders’ Roundtable, presented by the local Small Business and Technology Development Center, Thread Capital senior program manager Shannon O’Shea was among several lending programs' representatives who told an audience of local bankers about the benefits of participating in these programs.

“Our Rapid Recovery program is designed to provide gap funding to help businesses stay open until other funds are available,” she told her audience.

In the months after hurricanes Florence and Michael last fall, Thread Capital staffers realized that many areas of the state were suffering longer-term effects of those storms. So the agency launched a second program in January called Resilient Recovery. These loans of up to $250,000 are aimed at businesses that don’t qualify for SBA loans, and they can address both physical and economic impacts from disasters, O’Shea said.

“These loans are not made in a vacuum,” she added. “They are paired with coaching and connections to resources. We work with other CDFIs [Community Development Financial Institutions] in the state.”

The Resilient Recovery program looks beyond a business’s immediate post-disaster needs; it is designed to help affected businesses plan for the future as well, O’Shea said, adding, “I see this as getting clients ready for real bank lending.”

Information is available online at threadcap.org/disaster-recovery.

Three other lenders explained the distinctive aspects of their programs.

Elaine Fairman, executive director of BEFCOR, a Certified Development Company that lends to small businesses in North Carolina through the SBA 504 program, discussed the partnerships that CDCs establish with banks to provide loans to businesses for capital expenditures. The loans, which are open to almost any kind of business, can underwrite the cost of real estate and capital equipment, Fairman said. A 504 loan requires a borrower to put 10% down. Another 40% comes from the CDC, and the remaining 50% from the bank. Interest on a 10-, 20- or 25- year loan is less than 5%, according to Fairman.

While most loans are for real estate, “we have done pure mergers and acquisitions,” Fairman said.

BEFCOR, with offices in Charlotte, New Bern and Raleigh, funded two of the four SBA 504 loans made in the Wilmington market between Oct. 1, 2017, and Sept. 30, 2018, according to SBA data.

Don Spry, senior area manager for the Small Business Administration, talked about SBA-guaranteed 7(a) loans, which are the agency’s most prominent loan program.
He also mentioned the SBA’s natural disaster loans, which the agency makes directly to businesses; Veterans Advantage loans and the SBA Express loan program, which can operate as a 10-year line of credit of up to $350,000.

All SBA loan applications, however, require that a small business owner bring essential information about the business to the bank lender of choice.

“You are the first line to help small businesses plan and understand profit margins and cash flow,” Spry told the bankers in attendance.

Wilmington, of course, is home to the nation’s largest SBA lender, Live Oak Bank. Other SBA lenders with a physical presence in the Wilmington market are First Bank, FNB, SunTrust Bank, Wells Fargo Bank, BB&T and TD Bank.

Rossie Bullock, area director of USDA Rural Development, spoke about the Business & Industry Guaranteed Loan Program, which operates through various types of financial institutions. Borrowers must be located in an eligible rural area.

Loans can be used for real estate purchases and improvements, machinery and equipment purchases or working capital. Some debt refinancing loans are available, Bullock said.
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