Rounding up a loan

Growing Steamboat businesses lock in interest rates

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Business owners in Routt County are lassoing a method of capitalization that allows them to lock in a favorable interest rate for 20 years. Just as important is the opportunity to own businesses in a resort town where real estate prices are escalating rapidly.

Steamboat businesses are using loans form the Colorado Housing and Finance Auth--ority more than their counterparts in other rural communities across the state. Since 2000, 22 businesses here have arranged capital loans through CHFA, including medical clinics and ski shops.

"It's very unusual," CHFA Executive Director Roy Alexander said. "We've seen a rapid increase in loan production in Routt County in the last three years."

CHFA was formed in 1973 to ensure the availability of attainable housing for Coloradans. During the economic difficulties of the early 1980s, CHFA's role was extended to business owners. The intent was to increase employment opportunities statewide by helping small businesses acquire real estate, CHFA spokeswoman Kris Zierk McLain said.

Rick Grant of Western wear wholesale company Schaefer Outfitter, said his company has been able to increase its business by 150 percent in the past three years since acquiring a CHFA loan. At the same time, the company has doubled the size of its line. Schaefer Outfitter sells Western clothing and ranch wear made in the U.S.

Grant and his wife, Lynn, used the CHFA loan to purchase a larger location in the Copper Ridge Business Park on Steamboat's west side. It allowed them to greatly expand their warehouse and, with the increased space, broaden the product line.

"We've grown so fast, and (the CHFA loan) was absolutely instrumental," Grant said. "Through our bank, we were able to arrange a 20-year loan at 6.8 percent. There wasn't anything else like that out there."

As recently as 2002, Schaefer Outfitter was operating out of a 1,200-square-foot building that afforded the company 800 square feet of warehouse space. Inventory was stacked to the ceiling.

Now, the Grants have a prominent corner building with 3,700 square feet of space that allows them to have a wholesale showroom.

Kathy Stokes and her husband, Terry, owners of the Steamboat PostNet franchise, have obtained a pair of CHFA loans for their young business. The stability offered by a fixed-interest loan compared with an adjustable rate mortgage has meant a great deal, she said.

"You sleep better at night," Stokes said.

Stokes obtained her first CHFA loan in 2001 to purchase their office condominium at the Steamboat Crossings commercial center. In the interim, their franchise became the highest grossing in the PostNet chain. Last year, to meet demand, they took out a new CHFA loan, allowing them to add 1,000 square feet of space. The original loan was rolled into the new loan.

Today, PostNet has nine full-time, benefited employees.

CHFA is not a state agency, but it operates with legislative and executive branch oversight. And it doesn't spend any tax dollars.

Of its 11 board members, eight are appointed by the governor and confirmed by the state Senate. The state auditor also sits on the board.

"We have to maintain a strong balance sheet," Alexander said.

Like government entities, CHFA is able to raise capital by selling bonds.

"We sell bonds into the capital markets, and the proceeds of the bonds fund the loans," Alexander said.

In some cases, the bonds are tax-free. The agency uses the funds realized through bond sales to provide loans and funds its operating expenses with the margin between the low rates on repayment of the bonds and the reasonable rates it is able to charge loan customers.

Area banks play an important role in the CHFA loan process. Grant said he approached Bob Kuusinen at First National Bank of Steamboat Springs about the loan he needed to purchase his building.

"CHFA is for real estate loans," Grant said, "but working capital is critical to us, especially at the rate we're growing, so our relationship with our banker at First National is important to us."

Kuusinen did some research and presented a loan analysis that gave him several options, Grant said.

Alexander said CHFA is eager to work with local banks in the loan process.

"It's a beautiful thing for us," he said. "The local banks are eager for the relationship. The deposit business and lines of credit for local businesses are important for them."

Stokes said she worked with Michelle Teachout of Vectra Bank on her first CHFA loan and with Jim Simon and Mike Sherrill of Capital Mortgage Advisors on the second loan.

"They did everything they could to get the loan," she said.

Typically, local banks will offer guidance in filling out the paperwork necessary for a CHFA loan.

CHFA personnel proved to be strong allies in purchasing her commercial condominium, Stokes said. The commercial center had not been converted from rental properties to condos, and they helped the Stokeses ensure the paperwork they needed to protect their interests was in place.

"CHFA made sure we covered all the bases," Stokes said. "We're not developers -- we're small business owners. This was outside our area of expertise. They were very careful to make sure all the documents were in order."

CHFA loans begin at $100,000 and require collateral. But borrowers, in many cases, can establish collateral through improvements made to the real estate.

For example, the Grants im----proved their warehouse space to convert a portion of it into a showroom. That investment constituted a portion of their collateral.

Nonprofits also are eligible for CHFA loans. A nonprofit child care center in Steamboat is among the 22 businesses that have obtained CHFA loans.

For Steamboat PostNet and Schaefer Outfitter, a CHFA loan also has meant an opportunity to build equity in a valuable commercial building.

-- To reach Tom Ross, call 871-4205

or e-mail tross@steamboatpilot.com

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