St. Louis County unveils new small business loan program
St. Louis Business Journal
January 8, 2010
by Rick Desloge
The St. Louis County Economic Council is introducing a new small business loan program it's calling Boost. The program, believed to be the first of its kind in the nation, will be an alternative to a popular U.S. Small Business Administration loan known as the 504 program, a loan primarily used by businesses for capital improvement investments, including real estate purchases.
In its initial phase, Boost will lend $5 million, with the money coming from a line of credit extended by PNC Bank to the St. Louis County Economic Council, said Rick Palank, senior vice president of the Economic Council, who developed the program.
County Executive Charlie Dooley planned to unveil the program during a State of St. Louis panel presentation Friday morning at the Renaissance Grand Hotel.
The St. Louis County Economic Council staff will administer Boost, which is geared to small businesses seeking expansion capital within St. Louis County. Target borrowers will be business owners who were considering SBA 504 loans, but because of eligibility restrictions on those 504 loans, did not qualify.
Boost will offer up to 90 percent financing and either floating or fixed interest rates tied to the London Interbank Offered Rate, known as LIBOR. That widely cited rate is similar to the U.S. banking system's fed funds rate.
Both the SBA 504 and the Boost loan require borrowers to put up 10 percent of the total loan. Small businesses seeking Boost loans will get half their funding from their own bank, and the St. Louis County Economic Council would lend 40 percent. The loan term could extend to 20 years to construct or purchase a building, or 10 years on an equipment purchase. Boost would lend a maximum of $500,000 to any one business, according to St. Louis County.
Palank said he started thinking about a Boost loan program a decade ago as the SBA started tightening eligibility requirements on its loans, including the 504. "We were in the final stages of getting this done then, but the untimely passing (of former County Executive Buzz Westfall in 2003) put it on hold," Palank said.
Unlike the 504 loans, the Boost program places no income restrictions on eligible small businesses, and the loans carry no prepayment penalties, he said. The county program's main restriction is it's limited to businesses in St. Louis County.
The new program comes as the economic slump has tightened small business lending. Congress recently approved an additional $125 million for SBA loans nationally and extended a stimulus program waiving fees on the loans, said Dennis Melton, district director of the St. Louis SBA office. Those fees typically run 2 to 3.75 percent of the loans, he said.
The SBA loan fees likely will be reinstated when the current funding runs out, which is expected to happen by the end of February, Melton said.
The St. Louis Business Journal sponsored Friday's State of St. Louis event.
