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Idaho companies take advantage of federal loan program

photo of modern home

This Ammon furniture store was built using U.S. Small Business Administration loans. Photo courtesy of Modern Home

Idaho companies are using U.S. Small Business Administration (SBA) loans to form and grow.

The SBA guaranteed more than $153 million in loans to small businesses in the Boise District Office, which serves southern Idaho and eastern Oregon, in fiscal year 2019, according to a statement. Nationally, the program provided more than $28 billion, the organization noted.

Building a store

Idaho business owners use SBA loans for a variety of purposes. Alan Sparks, owner of Modern Home in Ammon, used a $1.7 million SBA loan for his Idaho store, which opened in November 2017, and provides 15 jobs.

“The SBA loan was basically so we could buy land and construct a building,” he said. “We have furniture stores in Arizona, and we wanted to expand to Idaho.”

With the SBA 504 Loan program, Sparks was able to pay 10% of the cost, while his partner, Bank of Commerce, provided 50% and the SBA provided 40%. The advantage of the 504 program is the low down payment requirement, he said.

“It’s the only way we could have done it,” he said. “Putting down 20% to 25% would have prohibited us from being able to do it.”

Sparks wasn’t alone. The 504 program offered 82 loans in the Boise District for a total of $34 million, while nationally the program offered more than 6,000 loans for a total of more than $4 billion, according to the SBA.

The 504 loan program helps small businesses acquire fixed assets to promote economic development in the form of long-term fixed rate financing for fixed assets, the SBA said. Under this program, the SBA authorizes Certified Development Companies – in Sparks’ case, The Development Company in Rexburg – to provide financing to small businesses with the help of third-party lenders, typically banks.

Rainy-day fund

In addition to the 504 program, the SBA also offers the 7(a) program, which offers loans of up to $5 million that are typically used for land, equipment or capital. During fiscal year 2019, there were 350 7(a) loans in the Boise District, totaling $123 million, and 52,000 nationally, totaling $23 billion, according to the SBA.

photo of Speakers are Jesse Reese McKinney, CEO of @redaspenlove , Liza Roeser Atwood, CEO of @FiftyFlowerscom, and Jennifer Lastrow, founder of @360_Immersive.

From left, speakers are Jesse Reese McKinney, CEO of Red Aspen, Liza Roeser Atwood, CEO of Fifty Flowers, Jennifer Lastra founder of 360 Immersive. Photo by Sharon Fisher

“What I’ve used my operating line of credit funding for is a rainy day fund. They always advocate to get it in place before you need it,” said Jennifer Lastra, founder of 360 Immersive, a Boise-based virtual reality company, in an email message. “I haven’t yet been able to use it, but feel very confident and reassured having it.”

photo of nate Bondelid

Nate Bondelid

Tek-Hut Inc., a Boise-based computer company, used a $750,000 SBA loan to build a fiber optic network to provide high-speed internet to every school in Burley, said Nate Bondelid, president and co-founder, who was named by the SBA as Idaho’s Small Business Person of the Year on May 2.

Tek-Hut added a 5,000-square-foot building in Twin Falls and a second 10,000-square-foot location in Boise in 2018.

“This expansion led to a revenue increase of 350% and staff doubled,” said Jeremy Field, regional administrator for the SBA Pacific Northwest Region, in a statement describing the award.

The company primarily serves school districts, Bondelid said in an email message.

“We are the largest K-12 provider in the state of Idaho. We directly impact students in the classroom.”

The company now works with 72 school districts in the state, according to Zions Bank, which is the company’s financial partner.

SBA loans have advantages over other methods of funding, recipients said.

“This is a perfect step for my company vs. going angel investing or friends and family, especially if you don’t have a large network starting out that is financially wealthy or willing to take the risk on a startup,” Lastra said. “At this stage in my business, I’m not interested in diluting my ownership stake.”

For FY 2019, the Boise District’s top three industries, by number of loans, are construction, health care and retail, the SBA said.

About Sharon Fisher