Three years ago, Amy LaBelle was operating her wine business out of a barn in her backyard. Today, she and her husband, Cellar Master Cesar Arboleda, are the proud owners of a sprawling California-style winery on 11 acres in Amherst, complete with a tasting room, retail and café space, and an upscale post-and-beam function hall for weddings, parties and other special events.
In the year since the couple threw open the doors of the stylish operation on Route 101, the winery has become something of a NH darling, winning accolades for its wine and LaBelle’s entrepreneurship, and charming crowds with its community events like this year’s summer music series.
But LaBelle readily acknowledges that the new winery may not have become a reality without the help of a loan designed to help small businesses. She and Arboleda approached five banks before securing funding through the Granite State Economic Development Corporation, one of the state’s three certified development companies licensed to administer Small Business Administration 504 loans and other nontraditional funds.
“To pitch the idea of building a brand new state-of-the-art winery—that’s kind of a stretch in the Granite State,” LaBelle says. “Our winery was growing at an incredibly fast rate, and we really needed to expand. Without the loan we wouldn’t have been able to continue growing.”
A Critical Role
For small businesses in NH, the certified development companies play a vital role, providing what is often the only viable financial avenue to expand, purchase new real estate, buy machinery, or hire new employees.
Conventional loans typically require companies to come up with at least 20 percent of the purchase price as a down payment. CDCs, however, help qualified small businesses secure loans with smaller down payments and fixed interest rates, such as the SBA 504 or a direct term loan. Some CDCs also provide matching grants, microloans or other sources of funding or support.
The most common funding tool used by NH’s certified development companies is the SBA 504 loan, which divides the total loan between three parties—a bank or other conventional lender (50 percent), the CDC (40 percent) and the small business (10 percent)—and also splits the risk of default as well. The approach makes it easier for a small business to come up with the down payment, and allows the company to keep some cash on hand to make improvements or hire new employees.
“We fill the financial gap that makes the deal do-able. If it wasn’t for our money, the deal probably wouldn’t get done,” says Stephen Heavener, executive director of the Capital Regional Development Council, which works statewide providing SBA and direct loans.
In NH, the largest CDC is the Granite State Economic Development Corporation, which also works statewide on SBA 504 loans and approves about eight to 10 projects a month, according to Executive Vice President Scott Gardiner. The Northern Community Investment Corporation provides small businesses in Coos, Grafton and Carroll counties with a variety of loans as well as business management support.
“We want to help businesses and strengthen employment opportunities,” says Jon Freeman, president of the Northern Community Investment Corporation, which also serves areas in northeast Vermont. “We try to take them from where they are and help them become what they wish their business could be.”
Who They Fund
In recent years, SBA loans have been granted to a diverse range of businesses, from restaurants and hotels to doctors’ offices and retail operations, as well as to some of the state’s more unique businesses. Smuttynose Brewery in Portsmouth obtained an SBA loan to expand to a new facility on 14 acres in Hampton, which will include a 95-seat restaurant and a brewery with a larger production capacity than its Portsmouth location. (Brewing is expected to begin as early as November, with the restaurant opening early next year.) And SkyVenture, the extreme adventure park in Nashua that includes indoor skydiving, was approved for an SBA 504 loan to build a new indoor surfing facility with a 32-foot surfstream. It is expected to open this fall. Both companies obtained their loans with the help of Granite State Economic Development Corporation.
The CDCs also work with other small business loans, including the SBA Intermediary Lending Pilot Program (ILPP), which makes direct loans of up to $200,000 and allow companies to use the money for working capital, real estate, materials, supplies and equipment. The Capital Regional Development Council, for example, recently closed an $80,000 loan through the new SBA ILPP for the NH School of Mechanical Trades in Manchester. The loan allowed the school to create more training labs and purchase new equipment.
In addition to administering a variety of loans, Northern Community Investment Corporation also offers business management training and marketing assistance to small businesses. In 2011, the agency helped Water Wheel Breakfast and Gift House in Jefferson develop new record-keeping systems and methods to better evaluate its performance.
“We recognize that many of the businesses in the region are homegrown and developed from people with strong will and good hearts, but they haven’t been sufficiently trained in business management, so we’ve developed a lot of technical support around those issues,” Freeman says.
The agencies can help determine what kind of loan or funding source might be the best fit and determine the business’s eligibility for loans. Some loans have specific mandates, such as the SBA 504, which requires the real estate purchased through the loan to be occupied by the owner.
In evaluating projects, the agencies typically look for established businesses that have been in place for at least three or four years, have good credit history and some collateral to secure the loan. They will work with a bank or lender to consider the company’s ability to generate cash flow and make payments on the loan.
The CDCs also consider the businesses’ ability to create employment opportunities or retain current jobs to build the state’s economy. “There aren’t a lot of tools in New Hampshire to recruit business,” says Heavener of Capital Regional Development Council, which makes nontraditional loans to assist the state’s emerging companies.
In Northern NH, where plant closings have shaken an already unsteady economy in recent years, the Northern Community Investment Corporation has made a concerted effort to find opportunities to create local employment. One recent success came in the form of a new data center in Littleton, built by the data storage and technology solutions company Secured Network Services.
The company, which is based in Norwood, Mass., chose Littleton to build a second facility because it wanted a location away from big cities in case a major disaster strikes. The building was purchased with the help of a direct loan. Located in the Littleton Industrial Park near Interstate 93, the new facility will be home to 10 new employees. “The new data center represents a great opportunity for Littleton and for SNS,” says Freeman.
Gardiner of the Granite State Economic Development Council says it is rewarding to help a small business grow. “We want to help companies buy a piece of real estate instead of leasing it,” he says. “Sometimes (owning) just changes the quality of the business or the mind-set. Now they’re rooted. They have a home.”