LVEDC assists two businesses acquire SBA financing

2/22/10

BETHLEHEM – February 22 – The trend toward more scrutinized financing has been among the biggest stories of the recession. But amid the tighter credit markets working capital is available. Case in point is the United State Small Business Administration 504 loan and two examples involving Lehigh Valley Economic Development Corporation showcase how we’re helping to lead businesses to acquire the financing they need to expand their businesses that ultimately create additional jobs in the Lehigh Valley.

LVEDC administered the U.S. SBA 504 to two separate applicants – Palmeiro Realty LLC and Daniel J. Loikits that were recently approved by the SBA. The financing plainly shows that credit is available for suitable borrowers.

“The SBA 504 financing assists entrepreneurs and small business owners start, build and grow businesses,” noted LVEDC Vice President John Kingsley. “We’re pleased to have assisted Palmeiro Realty and Daniel Loikits acquire affordable, long-term financing to meet their expansion plans. It’s another example of how LVEDC is committed to fostering expansion among existing Lehigh Valley businesses, working with our regional banking partners.”

The SBA 504 Loan is one of numerous financing programs and incentives that LVEDC administers. These programs are available to a broad range of companies and offer lower cost alternatives and complementary financing to traditional funding resources.

In total, Palmeiro Realty secured a $232,427 SBA loan to assist the purchase and renovate two existing buildings in South Whitehall Township and Mr. Loikits was approved for $300,000 in SBA financing for the purchase and renovation of a building in Coplay. Palmeiro Realty, operating under the name Lehigh Valley Veterinary Dermatology, LLC, will open a new veterinary facility. Mr. Loikits, operating under the name Loikits Industrial Services, Inc., will relocate his business that involves the sales, service and instillation of gasoline pollution abatement systems, such as carbon absorption, thermal oxidizers, flares, chilled lean oil absorption and refrigeration condensation equipment for bulk terminals.

“LVEDC proved extremely valuable in navigating the loan process,” said Mr. Loikits. “They provided competent direction and I trusted their expertise to make this successful.”

“I was pleased with the loan LVEDC helped me obtain,” noted Dr. Brian Palmeiro of Lehigh Valley Veterinary Dermatology. “The service and professionalism impressed me.”

The SBA 504 loans provide long-term, fixed-rate financing to small businesses to acquire real estate, machinery or equipment for expansion or modernization. Typically a 504 project includes a loan secured from a private-sector lender with a senior lien, a loan secured from the SBA with a junior lien covering up to 40 percent of the total cost, and a contribution of at least 10 percent equity from the borrower.

“The SBA exists for the express interest of fostering small business growth,” said Kingsley. “SBA 504s offer most types of small businesses affordable financing for real estate, machinery and equipment purchases. The economic development component of the 504 is that the amount of financing available is tied to job creation. Small business expansion also means increased collateral business activity and increased revenues from new payroll, business and property taxes.”

Borrowers of the SBA 504 enjoy 10% down payment (15% for start ups), a low fixed interest rate on SBA portion and a 20-year term. Almost all for-profit businesses are eligible to apply.  Funds can be used for purchase of land, building, new construction, building renovations & associated soft cost (Term 20 years). Funds can also be used for machinery and equipment (Terms of 10 or 20 years depending on life of asset). The SBA 504 program will not finance inventory, accounts receivables or working capital.

Borrowers aren’t the only ones who reap the benefits of the SBA Loan program. Banks who are the primary lender are listed as the first position on assets being purchased; they retain the deposit accounts and receive Community Reinvestment Act (CRA) credits.

For more information on the SBA 504, please contact Judy Yanega, Manager of Finance, at jyanega@lehighvalley.org or 610-266-6622 or John Kingsley, VP, Economic Development Finance, at jkingsley@lehighvalley.org or 610-266-0887.

For more information, please contact Stephen Althouse at 610.266.3817 or salthouse@lehighvalley.org.

Lehigh Valley Economic Development Corporation (LVEDC) is a one-stop, full-service business and economic development agency. Created to promote and foster economic prosperity in the Lehigh Valley, LVEDC assists businesses by providing them with regional, economic and demographic information, finance and business incentives, site and facility availability, business networking, and workforce services. By coordinating with state, county, and municipal governments, chambers of commerce, industry organizations, educational institutions and utilities, the award-winning LVEDC streamlines the relocation and expansion process for businesses. Visit LVEDC online at www.lehighvalley.org.