Business bucks: Government programs open lenders' doors.

• Author: McKimmie, Kathy
• Position: Business Finance

Trying to sell your idea to a banker still takes perseverance, but we talked with small businesses around the state who've found lenders can be more receptive through a couple of government programs.

Jim Banaszak finally realized his 25-year dream of opening a banquet center in New Carlisle after enduring several turndowns from banks. He secured $1.2 million in financing, using the Small Business Administration's 504 program.

Banaszak was already a successful restaurateur before his latest venture, which helped pave the way for the loan. To make his Ambrosia Banquet Center a reality, Banaszak sold some real estate and put the $500,000 proceeds down as part of the financing package. MFB Financial in Mishawaka put up $750,000 and $460,000 came from SBA 504-backed bonds, through the Business Development Corp. in South Bend. In convincing the bank to participate, he says, 'Your money is ahead of mine, and the SBA money is ahead of mine, and I am going to fight and kill to protect my end of it."

Although Banaszak chose to put down a half-million dollars of his own money as part of the 504 loan process, most borrowers put only 10 percent down, an attractive feature of the program.

Banks around the state work with Indiana's five SBA-approved certified development companies to make 504 loans happen: Business Development Corp. of St. Joseph County; Community Development Corp. in Allen County; Indiana Statewide Certified Development Corp., Indianapolis (the only CDC to serve the entire state, arranging 54 loans totaling more than $25 million in fiscal 2001); Premier Capital Corp., serving Marion and five other central-Indiana counties; and Northwest Indiana Regional Development Corp. The SBA guarantees debenture (similar to bonds) for as much as 40 percent of the project, up to $1 million. Loans can be made for up to 20 years.

SBA's 7(a) loan guarantee program, its most popular, can be used for most business purposes including purchase of real estate, renovation or leasehold improvements, acquisition of furniture, fixtures, machinery and equipment, purchase of inventory and working capital. It gives the banks the comfort level they need to make loans by guaranteeing 85 percent of loans of $150,000 or less and 75 percent for loans from $150,000 to $1 million. Interest rates typically range from 2.25 percent to 2.75 percent above prime.

Mary Cox and her husband Jeffrey received two 7(a) loans through Bank One, totaling about $250,000, to finance One...