Dear Friends, Stakeholders, and Supporters,

Welcome to Small Business Development Corporation of Orange County (SBDC-OC) inaugural newsletter for the quarter ended March 2019.

We hope you enjoy our small business success stories including our feature commentaries from Peter’s Credit Corner and Jim’s Spot. SBDC-OC is coming off a stellar 2018 year and that momentum has rolled into our first operating quarter based on current production numbers. The agency’s credit guarantee issuance totaled $18.5 million this quarter supporting some 26 projects totaling $27.1 million in bank and non-bank financing. This financing supported the creation of 271 new jobs as well as the retention of 983 existing jobs of which 77.0% were located within low-to-moderate income communities. We also supported $1.4 million in new financing facilities to help support four not-for-profit organizations.

We wish to thank our top two tier lenders, City National Bank and Pacific Premier Bank having provided $12.0 million in new financing opportunities for small businesses in the region. Both are progressive financial institutions committed to assisting small to medium-sized companies. We’re confident their increased deployment of capital will continue to grow heading into the second quarter.

Small Business Development Corporation of Orange County is one of seven economic development organizations residing under the California Infrastructure & Economic Development Bank (IBank), located within the Governor’s Office of Business & Economic Development (Go-BIZ). 

Michael A. Ocasio, President / CEO

Peter’s Credit Corner

With the start of the new fiscal year for the State Guarantee Program, the maximum dollar amount of guarantee was lowered to $1,000,000.  The guarantee percentage maximum remains at 80.0%.  But that doesn’t mean you can’t still do higher loan amounts and lower your percentage guarantee to get more of your loan transaction covered.  Let’s take an example:
 

ABC Manufacturing wants to buy the building they have leased in Paramount for years. The purchase price of the building is $2,000,000 and they want to put 10.0% down, so the amount being financed is $1,800,000.  By requesting a 55.0% guarantee, or $1,000,000, your effective loan to value in the transaction becomes $800,000 or 40.0%, which will keep your Chief Credit Officer, Shareholders and Regulators happy!   Just remember that the guarantee is good for a maximum of 7 years, so you want your borrower on an amortization that will bring the principal balance down to an easily financed level after 7 years. Happy Hunting!

Peter Meyers, First Vice President
Farmers & Merchants Bank of Long Beach

Jim’s Spot

Somewhat oxymoronically SBA just issued an interim final rule.  While interim means temporary and final means not temporary they still issued an interim final rule that adjusts the size standards for small business financial assistance to adjust for inflation.  Inflation by the way since 2009 has been below the Federal Reserve’s targeted goal. 

The SBA is adjusting its industry-specific monetary-based size standards by nearly 8.4% to reflect the inflation that has occurred since the last adjustment for inflation in 2014. This time, the SBA is also adjusting the revenues-based size standards for agricultural industries, which were previously set by statute. These adjusted size standards will become effective on Aug. 19, 2019.

If all that is too complicated, remember that the interim alternative size standards for the 7(a) and 504 loan programs will remain in effect.

This alternative size standard, put in place as part of the Small Business Jobs Act of 2010, is not more than $15 million in tangible net worth and of not more than $5 million in the average net income after Federal income taxes (excluding any carry-over losses) of the applicant for the two full fiscal years before the date of the application.  Net income after taxes LESS than $5,000,000 means that a company is considered small and eligible for SBA financial assistance.

I would have never thought that a company with net profits in the millions of dollars would be considered small but it is according to the SBA.

Eligible uses of proceeds include real estate purchase, real estate debt refinance, business acquisition financing, business debt refinance, equipment purchase and working capital.  SBA loans are well suited for the purchase of an existing business.

A well qualified buyer can put as little as 10.0% down.  About 24.0% of all SBA loans currently are being used to finance the acquisition of an existing business. The business itself needs to demonstrate the ability to service the debt as well as justify the purchase price based upon historical cash flow.  

Jim Ely, Loan Committee Chairman

Success Stories

Portview Preparatory

Lender: CalWest Bank
Employees: 151 | Jobs Created: 6
Assembly District: 55
Senate District: 29

Portview Preparatory is a school serving children with special needs from K-12.  Students receive personalized education catered to their individual needs.  In addition to classroom based educational activities, the school offers therapeutic services for cognitive, emotional, and physiological needs of their students to prepare them for life as an adult. Their current location allowed them to service 60 students, but through the financing provided by CalWest Bank, the school was able to expand and increase their capacity to 100 students.  

Behavioral Health Services, Inc.

Lender: International City Bank
Employees: 342 | Jobs Created: 0
Assembly District:  62
Senate District:  35

Established in 1973, Behavioral Health Services (BHS) is a 501(c)(3) non-profit community-based healthcare organization providing medical services, substance abuse, mental health, drug-free transitional living, housing for women with HIV, and prevention services for the local community.  The organization operates 19 locations covering the South Bay, East Los Angeles, the San Gabriel Valley, and the metropolitan areas of LA County including two chemical dependency recovery centers.

AVID Behavioral Day Program Corp.

Lender: Bank of Southern California
Employees: 142 | Jobs Created: 65
Assembly District: 76
Senate District: 36 

Advance Via Individual Development (AVID) is a private not for profit organization that was established in 2013 by partners Lorena Maharaj (CEO) & Sarai Marcelin (COO). AVID provides a variety of services to assist adults and children with a variety of behavioral challenges typically associated with severe learning disabilities, intellectual disabilities, autism, several emotional disabilities & psychosis. AVID currently has a facility in Escondido with capacity for 45 clients and their new location will be in Vista that will also accommodate 45 clients. Services include functional skill/vocational development training, self-advocacy, mobility training, access to community resources and behavioral management. The agency manages services to over 27,000 adults and children throughout the San Diego & Imperial counties.

RBT Electric, Inc.

Lender: Pacific Premier Bank
Employees: 142 | Jobs Created: 65
Assembly District: 76
Senate District: 36 

RBT Electric was established in 2008 as a California S-Corporation by Ryan Tittsworth.  RBT is a minority-owned, SBA 8(a), Service-Disabled Veteran Small Business (SDVOSB) and HUBZone Certified electrical contractor located in Orange County, CA. Their areas of specialization include design-build solar, military and public works projects. 

We’d love to connect with you!

We see social media as a valuable tool to engage audiences into a conversation on the activities of Small Business Development Corporation of Orange County. By sharing who we are, what we do and our role in underserved communities and more specifically, opportunity zones, we hope to build closer relationships with the public and bring us closer to our valued resource partners.

We mainly communicate via Facebook, Instagram and LinkedIn – follow us and help spread our message; our handle is @sbfdoc and hashtag: #sbdoc