Orchards auto repair shop grows thanks to SBA loan

By Gordon Oliver, Columbian business editor

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Casey McGowan spent 13 years as a mechanic for Dick Hannah dealerships and was finally going out on his own. Tapping his personal savings, McGowan purchased Independent Auto Repair in Orchards.

His first day as an owner was Sept. 11, 2001.

“It was a scary time for a small business,” said McGowan, 44, recalling the drop in business following the terrorist attacks on the United States.

McGowan’s shop, renamed Casey’s Independent Auto Repair, weathered those rough early days, as well as the more recent Great Recession. Almost a decade after buying the shop, his business has increased fivefold and his original staff of two-and-a-half has grown to eight.

So when McGowan last year saw an opportunity to move to a larger building and expand into tire repair and used car sales, his research led him to the U.S. Small Business Administration’s loan program. Working with Wells Fargo Bank, McGowan secured an SBA-guaranteed loan of just over $1 million at a 5.5 percent interest rate that resets after three years. He moved into the new building last October.

“It’s a great program. I can’t say enough good about it,” McGowan said of the SBA-backed loan. “I honestly don’t know why more people don’t look into it.”

As the economy shows more signs of gradual recovery, many agree with McGowan that SBA’s loans provide a route for business expansion. The SBA-backed loans provide longer terms and more certainty on interest rates to borrowers, while reducing risk to lenders in an era of increased regulatory scrutiny.

Still, signals remain mixed about how much demand there is for SBA loans. The market was distorted because of the elimination of loan fees in 2010 that created a late fall rush for loans. But those who work most closely in small business finance are encouraged as lenders embrace the new ethic of fiscal prudence by tapping into SBA loan offerings.

“More and more lenders are using SBA programs as they were intended to be used — to alleviate risk, rather than as a last resort,” said Jim Bright, a Vancouver-based vice president of the Northwest Business Development Association, a nonprofit certified SBA lender.

The SBA approved 42 loans in Clark County, totaling $15.2 million, in the six months since the Oct. 1 start of its current fiscal year. That compares to 49 loans for $12.5 million during the same six-month period a year earlier. It added another seven Clark County loans, for $2.7 million, last month.

This week the agency’s Portland office, which serves Southwest Washington, reported that its loan approvals were down month-over-month in April, and the loan amount was more than one-third below this fiscal year’s monthly average. The agency said the high loan volume last December raised the average, but the overall trend remains as clouded as the trajectory of economic recovery.

Lenders and borrowers alike are looking for ways to reduce risk in the current unstable economy. The SBA’s most popular loan offering is called the 7(a), which can be used by startups and existing small businesses for general business purposes. The loans come through banks and other lending institutions, and SBA offers guarantees to protect lenders in the event of borrower default. The SBA’s Portland office approves 700 to 1,500 loans each year. McGowan’s loan was through the 7(a) program.

A new offering launched this year in the 7(a) program is the Express Loan, with less paperwork and a quicker approval process for loans of up to $250,000. So far, demand for the loan, aimed at providing working capital for businesses in underserved areas, has been weak in the Portland-Vancouver area.

The SBA’s other major loan product is called the 504 loan, in which borrowers obtain 50 percent financing from a private lender, 40 percent from an SBA-certified lender, and cover 10 percent of costs themselves. The SBA’s Portland office provides some 80 to 120 of those loans annually.

Those who work with borrowers in obtaining SBA loans say they’re seeing growing interest in borrowing as businesses eye long-postponed expansions. “From our perspective, things have picked up,” said Bright, the Northwest Business Development Association vice president. “It’s not a tidal wave, but things are definitely improving.”

Marc Timm, director of commercial banking at Vancouver-based First Independent Bank, agreed. “There appears to be some pent-up demand of businesses wanting to expand,” he said. The business outlook, he believes, is shoring up. “A year ago, I was cautiously optimistic,” Timm said. “Now I’m optimistic.”

Wells Fargo honored

Wells Fargo, which issued the loan for McGowan’s business expansion, has long been a leader in SBA lending. This evening, the bank will be named SBA Lender of the Year for Oregon and Southwest Washington for the fourth consecutive year. That award recognizes the bank’s status as the region’s top lender by dollar amount of SBA-guaranteed loans, with $26.5 million in loans in the last fiscal year.

“This is a line of business for us,” said Tom Taylor, Wells Fargo Oregon Region Business Banking Manager. “We try to make SBA lending very easy compared to the old days, when it just took forever.” In Clark County so far this fiscal year, Wells Fargo has issued five loans with a $2.7 million value.

McGowan said he did his own research about loans on the Internet and then set out to find a bank. He secured approval for an SBA loan early last year and then set out to find a bank to borrow from. “It was difficult to get anyone even to meet with me,” he said.

He finally found Wells Fargo, and he’s pleased that he came to a result that will help him build his business. “I’m a firm believer in being patient and persistent,” he said. “There are families that rely on us to make the right choices.”