Staff Photo by Margaret Fenton Cindy Ladd recently bought the Mayor's Mansion Inn using a Small Business Administration loan. Special events director and chef Julie Smith prepares the signature three-course breakfast for overnight guests waiting in the dining room.
Nashville residents Cindy and Mike Ladd fully intended to use their retirement fund to buy the Mayor’s Mansion Inn.
But the economy declined in the fall and their accounts started to lose money. The couple began looking for a loan, and found it at the Small Business Administration.
In September, the couple completed the purchase of the inn with the help of a loan from the SBA that amounted to 30 percent of the total.
But the process was not easy, and it was very different from borrowing from a bank, which mainly requires that the necessary assets are in order and payments are made on time.
“With the SBA, they’re not just loaning you money,” Mrs. Ladd said. “In a lot of ways, they become your partner.”
Under the American Recovery and Reinvestment Act, the guarantee on basic small business loans was raised to 90 percent and fees for borrowers were reduced.
Since those provisions were implemented in mid-March, loan volume has increased by an average of 25 percent each week. New SBA loans have been made by more than 450 lenders who had not lent money since October 2008, according to a release from the SBA.
Also, on May 1, the SBA announced more businesses would be eligible for SBA-backed loans. The program become effective soon after the announcement and will continue through September 2010.
Lenders who work with the SBA estimate that volume is up locally about 25 percent. BrightBridge Inc., a local nonprofit organization that works with the SBA, the volume of loans is up noticeably, said Mike Ohlman, the group’s lending director.
“It’s excellent, volume is up very much,” he said. “What happens when these loans are done is the bank ends up having a 50 percent loan to value on their loan, so it is very attractive to the bank.”
But the Ladds, with help from BrightBridge, worked hard to get that loan and secured a rate of 4.25 percent, one of the lowest interest rates in history, Mr. Ohlman said.
The couple’s loan was made with help from Charles Millirons at Cornerstone Bank. Mr. Millirons has been making SBA loans for more than a decade. He said he has seen a slight increase in the number of people looking for an SBA loan, but he believes that may be because people just don’t know what is available to them.
“That’s where we and others are trying to educate the public about what is possibly out there and the potential impact,” he said.
Individuals who have an SBA loan or are looking for one could land a low interest rate and stand to save thousands of dollars in fees, Mr. Millirons said.
Mrs. Ladd is happy the way things turned out. For one, she has the inn.
And now that she has a loan with the SBA, someone will be auditing her books once a year to see if she is still on track — something she said is helpful.