According to a recent bulletin from the U.S. Small Business Administration, approval rates for small business loans remain restrained among all lenders compared to pre-pandemic rates. Approval rates among traditional lenders were relatively flat between 2021 and 2023, while alternative lenders showed only a slight increase in approval rates.
That means it’s hard for organizations – especially small businesses and non-profits – to grow or improve fixed assets such as real estate, heavy machinery, and production equipment. And that’s a real issue, because demand for many products and services is returning to pre-pandemic levels.
Columbus-Franklin County Finance Authority is bucking this trend by offering financing to small businesses and non-profits at a below-market 4.50% rate for fixed-asset projects.
The Finance Authority has paired capital provided by the U.S. Department of Commerce’s Economic Development Administration (EDA) with CFFA’s Neighborhood Improvement and Small Business loan program. The result is approximately $4.9 million available for lending to Central Ohio’s small business community.
“While the EDA financing will focus on Columbus and Franklin County, our Neighborhood and Small Business program is able to reach the entire 11 county Central Ohio region,” says Finance Authority Vice President Rose Roman. “These combined funds allow us to work with additional small organizations throughout the Columbus Region with the buy-in of the local jurisdiction.”
Roman says CFFA is prioritizing minority- and woman-owned businesses and encourages them to contact her or Matt Lima, CFFA’s Small Business Loan Officer. “These businesses are very much aligned with the mission of these funds,” says Roman. “We’re also looking to fill financing gaps in disinvested neighborhoods, and we encourage non-profits and developers committed to small affordable housing projects to apply,” adds Roman. CFFA funding can be paired with traditional bank funding to lower the overall project interest rate.
Meeting a Need
The ISM Manufacturing Index reports that U.S. factory activity ended 2023 contracted for the 14th consecutive month. While more than 75% of manufacturing industries project that revenue will increase in 2024, high borrowing costs could affect capital spending to meet those orders.
Manufacturing is important to the state. According to the Ohio Department of Development, small- and medium-sized manufacturing companies represent 90% of job growth for high-paying jobs. “For every new manufacturing job that is created or retained, multiple supporting jobs are also created,” says Aaron Patrick, the department’s Director of the Ohio Manufacturing Extension Partnership (MEP). Patrick’s office manages a network of regional service organizations that serve as a statewide resource to meet the needs of key industry sectors and small manufacturers. “MEP helps Ohio’s small- and medium-sized manufacturers increase sales, create jobs, and generate cost savings through technological innovation, process improvements, workforce training, and improved management practices.”
CFFA is developing referral relationships with ecosystem participants – including MEP – at Columbus State Community College, which serves the Central Ohio manufacturing community.
Small Business Financing in Action
CFFA’s Small Business and Neighborhood Improvement Loan Program has been used successfully in recent years. In 2022, the Finance Authority provided a $125,000 loan to the non-profit Sanctuary Night to cover a financing gap as it completed renovation of its first dedicated community service space in Franklinton. Sanctuary Night provides a safe place for vulnerable women to rest, eat, and connect with vital resources.
A year earlier the program provided financing to Distinctive Kitchen and Bath, a fabricator of granite and quartz countertops. The loan helped the company purchase new cranes for their production area. “The ease of financing through CFFA helped maintain our timeline (for growth),” said owner Jon Rupert at the time. “I felt like Patty was on my team. She was there to make things happen.”
The Neighborhood Improvement and Small Business Loan program provides financing for up to $750,000 for nonprofits and small businesses as defined by the U.S. Small Business Administration. It’s available for land and building costs, as well as investment in construction, renovation, machinery, and equipment. It can serve as a stopgap solution with no penalty for prepayment. “With terms up to 20 years at 4.50%, it’s among the most affordable and flexible financing options available in the Columbus Region,” says Roman. “It’s a great option for entrepreneurs with growth opportunities!”
To learn more, contact Finance Authority Small Business Finance Officer Matt Lima at [email protected] or call 614-721-3854.
The CFFA Neighborhood Improvement and Small Business Loan Program
Purpose: Low-interest financing for real estate acquisition, facility Improvement, or purchase of manufacturing equipment
Loan Amount: $75,000 to $750,000
Rate: Currently 4.50% / Fixed
Term: Equal to useful life of financed asset up to 20 years
Required Equity: Minimum of 10% of project cost