As SBA loans surge in Minnesota, borrowers make first move with banks – Star Tribune | Region & Cash

Five years ago, Darrold and Marty Glanville used a $150,000 loan from the Small Business Administration to purchase a mill and other equipment to expand their Sunrise Flour Mill company in North Branch, Minnesota.

The couple founded the company after retiring from careers in manufacturing and teaching. By the time they enlisted the SBA’s help, the company already had restaurants buying the flours they make from organic, traditional wheat.

Today, they sell a variety of flours, pastas, and baking mixes to stores and online to consumers across the states. And the SBA recently recognized the Glanvilles as Minnesota Encore Entrepreneurs of the Year.

“It could be something like, ‘Foolish old people who still own a business and work hard as they hit 80,'” Darrold Glanville said. “But we are very honored and very impressed by the SBA and the help they have given us.”

The SBA supported $1.25 billion in its traditional lending programs in Minnesota in fiscal 2021, according to Brian McDonald, district director of the SBA’s Minnesota District Office.

That represents a 58% increase in dollar amounts over the prior year, and the 2,358 loans supported or created 26,520 jobs in the state. For 2022, the state’s SBA loan amount to date is up 9% from that baseline.

“SBA is a great tool to acquire or expand a business,” said McDonald. “There are a lot of start-up companies that use this and this is also debt financing so you are not giving up an equity stake in a company. For a variety of reasons, we see a boom for SBA.”

How SBA loans work

Traditional SBA loans don’t come directly from the agency, McDonald said. Instead, a small business owner or someone starting a business would go to one of more than 400 lenders in the state to apply.

The SBA’s 504 loan program provides long-term, fixed-rate financing for key tangible assets that support business growth and job creation, according to the agency’s website. They are available through certified development companies that are certified and regulated by the SBA to promote local economic development.

The SBA’s 7(a) loan program is the best option when real estate is part of a business purchase. This loan can also be used for working capital, refinancing business debt, and buying furniture, fixtures, and supplies, according to the site. The agency’s microcredit program offers up to $50,000 to help small businesses start or expand.

The microcredit program requires lenders to provide free counseling and education to their borrowers, McDonald said.

For other loan programs, free training is available from Score, which has more than 300 volunteer mentors in Minnesota, and Small Business Development Centers. Nine regional centers operate under an agreement between SBA and the Minnesota Department of Employment and Economic Development. Women Business Centers — including WomenVenture in St. Paul and the Entrepreneur Fund’s Women’s Business Alliance program in Duluth — are the other SBA resource centers for training and access to capital in Minnesota.

“They’re really great investments of taxpayers’ money in terms of return on investment because the companies that we follow, the companies that use these advisory and educational programs, end up growing their business faster, hiring more employees and paying back more taxes because they’re increasing their earnings,” McDonald said.

Outstanding Borrowers

In North Branch, the Glanvilles are considering applying for another SBA loan to fund Sunrise Flour’s continued expansion. “Our building has about enough space for people to walk through a bit,” said Marty Glanville.

And the Glanvilles are hoping someone could use an SBA loan or other funding to work with them if they consider retiring from day-to-day operations.

“We have great ideas and great plans for the future,” said Darrold Glanville. “At our age, it’s time to do other things.”

Jen Bellefleur and Kelsey Lee-Karol, co-owners of New Gild Jewelers, opened their custom jewelry store in the Linden Hills neighborhood of Minneapolis in 2017 with an SBA-backed loan from WomenVenture, an SBA lender that recently became the Minnesota Women’s Business Center SBA 2022 was named of the year.

At the beginning of the pandemic, New Gild received loans for the Paycheck Protection Program through the SBA. The company received a $10,000 SBA Economic Injury Disaster Loan Advance Grant.

New Gild, which has five employees, used its $75,000 seed loan to purchase home furnishings and expand its business, which opened with jewelry made by Bellefleur and Lee-Karol and pieces commissioned by local artists were given.

“Without that loan, we would have maxed out our credit cards and not survived in the long run,” Bellefleur said. “We might have had enough money to open the doors, but in the next three to four months we would have gone under.”

Kristen Denzer, Founder and CEO of Tierra Encantada, used SBA loans to open five of their 10 Spanish immersion early learning centers. Tierra Enantada’s locations in Minnesota, Illinois and Virginia now serve more than 1,000 children each year. A six-figure SBA loan funded the construction and outfitting of their first center in Eagan in 2013.

In an email interview, Denzer said she probably wouldn’t have opened her first center without the SBA, citing her lack of childcare experience and substantial capital. A loan to buy a commercial building required only a 10% discount with their SBA loan, compared to 25-40% discount with traditional financing.

That “makes a huge difference when you’re trying to save money on a down payment, especially on some of the larger buildings I’ve bought for our daycares,” Denzer said.

Denzer, who now uses conventional financing after reaching the SBA’s legal credit limit, is the SBA’s 2022 Minnesota Small Business Owner of the Year.

“This recognition is especially meaningful because we were selected from hundreds of thousands of small businesses in Minnesota,” said Denzer. “It’s not just a recognition for me, but also for my team who have worked so hard alongside me over the years. It represents the impact we make as we work hard to bring our vision to life and focuses on cities across the US.”

Todd Nelson is a freelance writer based in Lake Elmo. His email address is todd_nelson@mac.com.

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