Micah Palmer wanted to expand his niche recycling business and improve his line of credit.
So the executive vice president of Midlands Recycling in Lincoln looked into the federal Small Business Administration's temporary 504 loan refinancing program. The loan had a low interest rate, meaning a good opportunity for more cash flow.
He applied in the spring, shortly after the loan program's launch in February 2011, and by winter Palmer was approved for a 20-year refinance — a loan that allowed him to add five jobs, save two jobs and watch his 15-employee recycling operation grow.
“It was a good option for us,” he said.
That option is running out, and a proposed renewal is stalled in Congress.
Initially started to spur economic growth and help small businesses recover from the recession, the temporary refinancing program expires Sept. 27 — leaving a week, or until about Sept. 7, area lenders say — for small-business owners to submit their paperwork.
The temporary program giving small businesses a way to refinance existing debt — loans on long-term assets like land, buildings and equipment — was established through the Small Business Jobs and Credit Act of September 2010, a follow-up to the original stimulus bill.
In October 2011, the temporary refinancing program began allowing businesses to refinance for operation expenses such as salary, utilities, inventory or insurance.
The program is funded primarily through fees assessed for refinancing projects. In the temporary refinancing provision, a borrower needs to bring 10 percent. The lender and SBA split the rest.
The program is part of the SBA's permanent 504 program, which is aimed at financing expansion projects.
The temporary loan program's popularity soared in recent months after qualifications were loosened, said Scott Bestmann, a vice president with First National Bank's corporate banking group.
This fiscal year, the temporary 504 program has helped 18 Nebraska small businesses with refinancing.
The loans have helped hotels, warehouses, child care services, restaurants, used-car dealers, contractors, retail stores and other businesses, said Michael Foutch, a business development specialist with the SBA's Nebraska District Office in Omaha.
As of Feb. 15, $50 billion in 504 loans had created more than 2 million jobs nationally. So far this year in Nebraska, 66 temporary and permanent 504 loans worth $40.2 million have been approved.
The investment in small businesses means a lot for the state's economy, Foutch said. “Small businesses are creating more than 500 new jobs in Nebraska, and keeping nearly 1,500 jobs in the state,” he said.
Usually, 504 loans don't cover projects that are already up and running, but that's exactly what the temporary program does, said Leon Milobar, the Omaha-based district director of the U.S. Small Business Administration.
“I've never seen anything else like this before,” Milobar said. “When this goes away, it's a one-time deal. You better take advantage of it.”
Eligible businesses include owner-occupied properties with a commercial mortgage two years old or older, regardless of maturity.
The program allows small-business owners to borrow up to 90 percent of the appraised value of their available collateral, or 100 percent of their outstanding mortgage, whichever is lower. It requires a bank to lend an amount equal to or greater than the SBA amount. This ensures the borrower gets a long-term, low-interest fixed rate.
The terms of the 504 refinancing loan program were critical for Clark Ruby, chief financial officer of Behaven Kids, a day program for kids ages 2 to 8 with chronic behavioral problems.
Feeling the pinch of high monthly loan payments, Ruby was able to consolidate two loans into one and lower his monthly payments.
He used the equity to split the startup cost for a new day program location in Elkhorn. “That will be the biggest impact,” said Ruby, who also has day program locations in Omaha and Lincoln.
Brian and Nicole Neesen, owners of Granite Transformations for Kitchens and Baths, and their partner, accountant Perry Wiseman, can't say enough good things about the loan program. It lowered their monthly loan payments of $11,000 to $7,500 for the 11,000-square-foot building they share in the I-80 Business Park.
It allowed the Neesens to expand their business to Lincoln and add three employees during the recession. The loan improved both businesses' line of credit.
“It's nice to have that cushion,” Brian Neesen said. Without that cushion, the Neesens would've been slower to expand their business.
Their one piece of advice for small- business owners: Don't get discouraged by the application process.
“Don't allow it to intimidate you so much that you don't take advantage of this great opportunity,” Nicole Neesen said.
Milobar said it's an outstanding program for small-business owners. “We see a tremendous success rate when people utilize this loan program because there's assets involved and it's over a long period of time.”
Contact the writer: