"The Elephant Man" (Baton Rouge)
January 25, 2010
Octavia McCoy White
January 28, 2010
Businesses all over the Tri-parish area have benefited from federal stimulus money, and many of them didn’t even know it. Ventures as diverse as a mixed-martial arts gym, maternity clothing boutique and computer-networking company have all taken out Small Business Administration loans, with added perks from the American Recovery and Reinvestment Act, better known as the stimulus bill.
According to Mike Ricks, the regional director for the SBA, the number of loans in the area has jumped 144 percent in volume since the stimulus bill took effect, and more than $5 million in loans have been made to local small businesses.
For Mike and Aimee Johnson, getting a small business loan was crucial to opening their business, Rockin’ Mama maternity boutique.
“The loan has definitely helped us get where we need to be. We used it to get everything, to open the business, to get the merchandise, to basically start from the ground up,” said Mike Johnson.
Like many people receiving a loan through the SBA, the Johnson’s didn’t even know the federal stimulus was saving them money.
“They didn’t mention anything that it was part of the stimulus through the loan process. I’m not sure how much it played into us getting the loan,” said Johnson.
Under the stimulus bill, all small business loans are subsidized by the federal government. Unless a bank goes out of their way to mention the reduction in fees, borrowers wouldn’t know about the added perks.
“It’s one of those hidden benefits,” said Ricks.
Prior to an $825 million grant given to the Small Business Administration, borrowers would have to pay between 2 and 3.5 percent of the value of their loans in fees, and the SBA would repay lenders 70 percent of defaulted loans. Now, borrowers pay no fees, and the SBA guarantees 90 percent of the loan amount.
“Before the recovery act provisions, a lot of borrowers would look at that funding fee, and it was a real barrier to participation. That was more money that the borrower had to come up with the get the loan. Now, of course, it’s zero,” said Ricks. “This makes it a lot easier for the bank to sell the idea of an SBA loan to a potential borrower.”
Ricks also said that stimulus provisions have nudged banks into more lending.
“The increased guarantee makes it a lot more palatable to a bank to make that loan since risk factors are a lot lower,” said Ricks. “Small Business lending here in the state has gone up dramatically.”
Justin Verdin, owner of Extreme Mixed-Martial Arts and Fitness Gym in Houma, used a small business loan to get new equipment for his gym and to start a promotion company for his fighters.
“In Ya Face Fight Productions is a whole different organization. It’s a company that promotes fight productions in the whole area. We’ve had over 30 events so far,” said Verdin.
Like the Johnson’s and their maternity boutique, Verdin had no idea the stimulus helped him get a loan, but “it definitely helped out,” he said.
According to Verdin, the small business loan helped him keep his services open to everybody and even run a non-profit boxing program for area youths.
“It was good last year,” said Verdin. “It’s a success story, for me, just being here.”
Brennan Sevin, 24, (left) of Chauvin and Ryan Thompson, 14, of Houma train at Justin Verdin’s Extreme Mixed-Martial Arts and Fitness Gym in Houma. The owner was able to improve his business with a stimulus-bolstered small business loan. * Photo by BRETT SCHWEINBERG
