Small Business, Big Incentives

by Katie Arnholt Kim
The Kim Group Ltd

Think strategically about your goals… and how these programs can help make them a reality.

It starts with a dream to make a change, do something different or make a difference in the community, and it grows into a multi-person group working nights and weekends to get it all going. Before you know it, you have clients, staff and payroll. You now face the growing pains of a small business.

You tell yourself, “If I land this client, I will be able to afford to hire more staff and not work nights and weekends,” or “If I land this project, we can afford to move into a bigger space.” The growing pains of small business are real, and so are the incentives to help small businesses grow within our community.

As the year end draws near and you start to work on budgets and growth plans for the upcoming year, keep the following programs in mind to help you grow your business within the Greater Peoria region.

SBA Loan Programs
The U.S. Small Business Administration (SBA) provides a number of loan programs for small businesses. The 7(a) loan program focuses on purchasing a business or getting working capital, while the 504 program offers financing for the purchase of fixed assets including real estate, buildings and capital equipment. In addition, the Office of Management and Budget (OMB) has recently cleared the way for the issuance of a 25-year debenture in the SBA 504 program. What does this mean?

Instead of a 20-year amortization term on your loan, it can now do 25 years, which helps lower the monthly payment and increase cash flow for small businesses. An example, in dollars and cents:

  • Loan amount: $500,000
  • Loan payment with 20-year amortization term (4.5% rate): $3,163/month
  • Loan payment with 25-year amortization term (4.5% rate): $2,779/month
  • Difference: $384/month or $4,608 annual savings.

In addition to substantial monthly savings, one of this program’s major benefits is the rate lock. While most commercial loans adjust after five, seven or 10 years, the SBA-guaranteed portion of the loan (usually 40 percent) is locked for the term of the loan, which could now be up to 25 years. If you think your business will be around when interest rates increase, this financial stability is a huge advantage.

For more information about SBA programs, contact an authorized administrator such as Illinois Business Financial Services (ibfs.org). Trefzgers Development leveraged the SBA 504 program through IBFS and Hickory Point Bank for its development in Peoria Heights.

County and City RLF Programs
Peoria County’s MACRO Revolving Loan Fund (RLF) provides direct funding up to $600,000 to businesses in Peoria County. The funds are intended to assist existing industrial and commercial-based startup businesses, female- and minority-owned firms, and established businesses that will expand in or relocate to Peoria County. Trefzgers Development leveraged the MACRO RLF for its development in Peoria Heights. For more information, contact Peoria County at peoriacounty.org.

The City of Peoria Revolving Loan Fund Program offers fixed-rate, low-interest loans to assist businesses with startup/location/expansion projects and growth opportunities that retain or create jobs and stimulate investment. In addition, many other cities have their own RLF or similar incentive program. OneFire leveraged the City of Peoria’s RLF Program for its expansion at Cooperage 214 in Peoria’s Warehouse District. For more information, contact the City of Peoria’s Economic Development Department at growpeoria.com.

TIF Districts and Enterprise Zones
If you choose to start, locate or expand within a Tax Increment Financing (TIF) district like Peoria’s Warehouse District, you may be eligible for multiple benefits, such as property tax increment reimbursement for qualified expenses. The advantages of enterprise zones are unique to each municipality, but most provide a sales tax exemption on building materials, which is what many people think of when they hear the term. However, there can be many more benefits, such as employment tax credits, energy tax credits and investment tax credits, to name a few. To learn more about the benefits of TIF districts and enterprise zones within the area you are looking to locate, contact your local municipality’s economic development department or director.

An Information Checklist
In working with clients to create their strategic business plan and obtain financing, we have found that many are not aware of these programs, or they do not know how to leverage them to grow their business. While these programs may seem daunting to some, they require the same basic information needed for a traditional bank loan, such as:

  • Personal financial statement, a simple form your lending institution will ask you to complete which shows your assets and liabilities. (Make sure to ask for the form in an editable format and keep it with your end-of-year paperwork, as you will be updating it on a yearly basis if you move forward with any type of commercial lending program);
  • Past three years of tax returns (personal and business);
  • Last year’s profit & loss statement (P&L) and balance sheet;
  • Last 90 days’ P&L and balance sheet;
  • Business plan (If you have never created a business plan, we recommend working with a consultant or coach to guide you through the process and ensure you are incorporating key information on your growth); and
  • The application, of course!

The last two are typically the hardest for business owners to complete, as they are usually “working in” their business, and not “working on” their business. However, as you wrap up this year, take some time to think strategically about your growth and goals over the next year—and how these programs can help make them a reality. iBi

Katie Arnholt Kim, CCIM is CEO and Director of Commercial Division at The Kim Group.

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