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Credit starved? Small Business Administration loans are whetting businesses' appetites

(page 2 of 3)

“I use the line of credit pretty liberally,” says Roeth, who employs five people, including his wife, Laura. “It’s usually a matter of having to pay a vendor before an invoice from a customer comes through, and it’s just a little stopgap type of thing. We would not dip into that for payroll needs.”

Since its founding, Discount Vials has sold more than 2 million glass items — a combination of test tubes, vials, and specialty bottles of up to 8 ounces — to a diverse clientele. It includes research labs and pharmaceutical companies, massage therapists who need containers for the oils used in aromatherapy, the makers of various fragrances, police departments that use glass containers to store evidence, and even churches that need containers to store holy oil. Most customers are in the U.S., but the company also ships worldwide. “For some reason, we do surprisingly well in Australia,” Roeth says.

After going the SBA route, Roeth can demonstrate a track record of making payments, which could come in handy if he ever needs to pursue more traditional bank lending as part of a financing mix. Roeth, who has banking relationships with Chase Bank and Associated Bank, certainly does not view the lending landscape unfavorably. He’s pretty confident the required capital would be available if he needed to add new facilities or product lines.

“There seems to be a lot of offers of credit coming to me,” he says, “so I can’t imagine that if I did pull the trigger, there would be a problem.”

Jet Fuel

When Miriam Kuhn accepted the SBA’s Exporter of the Year and Midwest Regional Exporter of the Year awards last spring, she could tell just by listening to the stories of other award winners that SBA lending was instrumental to their success. As she learned about their business challenges, and how the SBA stepped into the breach, she could nod her head knowingly. 

“Without the SBA, several of those businesses would have either struggled quite a bit more or they would not have been successful,” she says. 

According to Kuhn, director of finance and administration for Contrail Aviation Support, SBA lending helped her company take flight. Contrail, a Verona-based broker of aircraft engine components, used the SBA to finance rapid growth that took the company from about $5 million in annual revenue in 2009 to $12 million in 2010 and nearly $30 million in 2011.

Wisconsin Bank & Trust, armed with SBA availability, stepped in when Contrail’s previous lender, the now-defunct Amcore Bank, was struggling and could no longer meet the company’s borrowing needs. Since Contrail finds it more profitable to acquire whole aircraft whenever possible — keeping the engines and selling the airframes to other businesses — it not only needs a lender that can scale into the millions of dollars on loans, it also needs one that understands a unique business model.

It was Wisconsin Bank & Trust that recommended an SBA loan become part of Contrail’s financing package, and while the SBA portion is not as large a component as it was in 2010, Contrail appreciates its association with SBA as it transitions to more expensive, next-generation aircraft engines. 

Contrail does not repair engine components. The company acquires engines as they come off a lease or retire, ships them to a “tear-down” facility that is certified to take the engine apart at the component level, and then sends the components to repair facilities certified by the Federal Aviation Administration. Once the components have been repaired or overhauled, Contrail sells them to aircraft maintenance facilities.

Now ranging between $20 and $30 million in annual revenue, Contrail anticipates another growth spurt as the newer engines come on line. With a bank and a financing package that can accommodate the company’s growth, Kuhn has fewer concerns about securing the necessary capital. Under the terms of the SBA loan, Contrail is required to purchase foreign receivables insurance, but Kuhn views that as a necessary business expense because 45% of the company’s sales are overseas.

“I give our lender a lot of credit because we were not aware that a loan like that would be available to us,” Kuhn says. “It’s not something we ever explored.”

King of the road

Four years ago, Raymond Mandli used his first SBA loan to establish a new technological beachhead, and his growing company hasn’t exactly been slogging along. It’s been marching on with very little resistance, even through the recession.

The technology his company, Mandli Communications, employs has been so well accepted by the target market, state departments of transportation, that Mandli’s workforce has nearly tripled to 160 since 2009, a period of time in which many local employers were content to hold on. 

Mandli deploys a fleet of vehicles — fully equipped with geographic information systems, high-end scanning laser instrumentation, and high-resolution digital cameras — to collect geospatial highway infrastructure data. The technology enables Mandli to create exact models of the conditions of highway systems across the country, which transportation planners as far away as Alaska can review from their desktops as they work to plan and maintain transportation infrastructure networks. 

To do the work, the 30-year-old company has built a fleet of 10 vehicles that it must equip with expensive technical equipment, at a total cost of between $300,000 and $700,000 apiece. Seven of the 10 are now scattered across the country, and their locations include Texas; New Mexico; Florida; San Diego’s light rail system, where the company will examine 53 miles of track; and the Oakland Airport, where it will provide data for the development of an airport pavement inventory. Mandli will soon send a vehicle by ferry to Hawaii, and also drive one to Alaska in the spring for statewide highway infrastructure projects.

As the geographic reach of Mandli Communications grows, so does its borrowing needs, which are now served by a combination of company revenue, traditional bank lending, and SBA lending — the latter for expansion purposes. The company has been with Monona State Bank the longest, and that’s where Mandli secured SBA loans in 2009 and again in 2012 to finance expansion. “We went back and added to that [SBA loan],” he explained. “We consolidated our financing and created a larger piece to accommodate expansion.”


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