May 30, 2024


Taste For Business

With SBA loans rising in Minnesota, borrowers take a first step with banks

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

The couple started the business after retiring from careers in manufacturing and teaching. By the time they reached out for SBA help, the business already had restaurants buying the flours they make from organic, heritage wheat.

Today, they sell various flours, pastas and baking mixes to stores and online to consumers in every state. And the SBA recently recognized the Glanvilles as Minnesota Encore Entrepreneurs of the Year.

“It could be named something like ‘Silly Old People Still Owning a Business and Working Hard When They’re Approaching 80,'” Darrold Glanville said. “But we are very honored and very impressed with the SBA and the help they gave us.”

The SBA backed $1.25 billion in its traditional loan programs in Minnesota during the 2021 fiscal year, according to Brian McDonald, district director for the SBA’s Minnesota District Office.

That represented a 58% increase in the dollar amount from the year before, and the 2,358 loans supported or created 26,520 jobs in the state. For 2022 so far, the SBA’s loan amount in the state is up 9% from that base.

“SBA is a great tool to acquire a business or expand a business,” McDonald said. “There are a lot of startup businesses using this, and this is debt financing, too, so you’re not giving up an equity stake in a company. For a variety of reasons, we’re seeing 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, fix-rated financing for major fixed assets that promote business growth and job creation, according to the agency’s website. They’re available through Certified Development Companies, which the SBA certifies and regulates 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 also can go to working capital, refinance business debt and buy furniture, fixtures and supplies, according to the website. The agency’s microloan program offers up to $50,000 to help small businesses get started or expand.

The microloan 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 from 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 Women’s Business Alliance program of the Entrepreneur Fund in Duluth — are the other SBA resource centers for training and access to capital in Minnesota.

“They are really great investments of taxpayer dollars in terms of return on investment because the businesses we track, the businesses that utilize these counseling and education programs end up growing their businesses more rapidly, hiring more employees and paying more back in taxes because they increase their revenues,” McDonald said.

Standout borrowers

In North Branch, the Glanvilles are considering seeking another SBA loan to pay for more expansion of Sunrise Flour. “Our building has about enough room for people to walk, a little bit, through it,” Marty Glanville said.

And the Glanvilles hope someone might use an SBA loan or other financing to partner with them as they consider stepping back from running the business day-to-day.

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

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

Early in the pandemic, New Gild obtained Paycheck Protection Program loans through SBA. The business received a $10,000 SBA Economic Injury Disaster Loan Advance grant.

New Gild, which has five employees, used its $75,000 startup loan to buy fixtures and build out its store, which opened with jewelry that Bellefleur and Lee-Karol had made and pieces on consignment from local artists.

“We would have maxed out our credit cards and not survived in the long run if not for that loan,” Bellefleur said. “We might have had enough money to get the doors open but over the months, three to four months to follow, we would have been under.”

Kristen Denzer, founder and CEO of Tierra Encantada, used SBA loans to open five of her 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 in 2013 financed construction and equipment for her first center, in Eagan.

In an e-mail interview, Denzer said she likely wouldn’t have opened her first center without the SBA, citing her lack of child-care experience and significant capital. A loan to buy a commercial building required only 10% down with her SBA loan, compared to 25-40% down with conventional financing.

That “is a huge difference when trying to save money for a down payment, especially with some of the larger-scale buildings that I have purchased for our child-care centers,” Denzer said.

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

“This recognition is particularly meaningful because we were selected from the hundreds of thousands of small businesses in Minnesota,” Denzer said. “It is recognition for not just me, but for my team that has worked so hard alongside me over the years. It represents the impact that we are making as we work hard to bring our vision to life and centers to cities across the U.S.”

Todd Nelson is a freelance writer in Lake Elmo. His e-mail is [email protected].