How Valley Economic Development Partners has helped businesses to navigate the coronavirus pandemic isn’t that different from the circumstances that led to its creation.
“It’s brought us back to our roots. We were born out of an economic crisis and this has brought us right back in,” says Terry Louk, Valley Partners’ director of SBA lending. “We’ve been able to focus on what we were truly created to do.”
Valley Partners – renamed from Mahoning Valley Economic Development Corp. earlier this year to de-emphasize the regional borders that it now works outside of – was founded in 1978, a year after Black Monday and the beginning of the end of the steel industry as a driver of the local economy.
What began with one grant to fund loans to local businesses has grown into a footprint that stretches across Ohio – it has partnered with agencies in Cleveland and Columbus and has jurisdiction to work anywhere in the state – and into western Pennsylvania.
Valley Partners offers six loan programs, including Small Business Administration 504 loans, Ohio Regional 166 loans, U.S. Department of Agriculture Intermediary Relending Program loans and its own revolving loan fund.
Last year, Valley Partners launched the $2 million EDGE – Economically Disadvantaged Grow into Entrepreneurs – program with grant funds from the Economic Development Administration and later supplemental funds from Premier Bank.
Most recently, the organization was awarded $5 million from the EDA to create the Valley Partners Revolving Loan fund. So far, says Valley Partners Executive Director Teresa Miller, $250,000 in loans have closed with another $3 million committed. Loans can be up to $200,000 and can be used on everything from working capital to buying assets.
“There’s very little you can’t spend it on,” Miller says.
Adds Louk, “There’s an advanced interest rate on it so if there’s a business that’s healthy but hesitant to expand because of economic concerns, they now have an enticement to do it.
“This [pandemic] is going to go away someday. Everyone’s question is when,” he continues. “People know it’ll get better and this loan fund gives them an opportunity to do it now and be ready once this is over.”
With seven loan programs available, Valley Partners has a suite of tools that can help businesses with whatever project they need. Selecting the right option, says its director of economic development lending, Mario Nero, focuses on the cost of the project, the loan term, the collateral a business can put forward and the number of jobs that can be created.
“Our mission has always been to promote economic development and work with companies to, if they can’t get traditional financing, find another way,” Nero says. “They may have had some bad marks and worked to redeem them. But they weren’t redeemed enough for a traditional bank loan. We were able to help them.”
Part of the organization’s rebranding was to emphasize the focus on partnerships, Miller says. Since it was created, the agency has worked with banks and other community development corporations to help in providing loans, thereby giving businesses alternative avenues to secure financing. All of the loan programs are available in partnerships with banks, with some such as the SBA 504 or USDA Intermediary Relending Program requiring their involvement. Others, such as the EDGE program are available as standalone loans through Valley Partners but can involve banks if needed.
By partnering with financial institutions, Nero says, the financing is a win-win-win. Borrowers can get the money they need for development projects, banks can take on loans that would normally be considered too risky to issue and Valley Economic Development Partners can continue its mission of fostering business development.
While the financing split between Valley Partners and the participating bank varies from loan to loan, Nero says having a second lender involved can make it easier for businesses to obtain financing.
“By working with us and a financial institution, businesses can reduce their equity requirements,” he says. “If a small business wanted to buy a building for $100,000, we’d find a bank to do 50%. We’d do 40% and the business would put down $10,000. Through traditional banks for the same loan, that could have $20,000 or $25,000 down. On a large transaction, say $10 million, 10% versus 20% is very big. Even for a family-owned business, $10,000 can be a lot of money and could carry them a long way.”
And for businesses taking advantage of Valley Partners’ loan offerings, the application and closing process is not much more strenuous than a traditional loan. Clients need submit only their paperwork to one office, which can then share it with the other. The only difference is that the borrower will need to sign two sets of closing documents.
“The items we ask for are the same a bank would ask for. You might have to sign some extra documents here or there or fill out a specific personal financial statement. But at the end of the day, we want to see the same things a bank wants to see,” Louk says. “We work well with banks and we try to keep all the heavy lifting between the two of us to make that process seamless for borrowers.”
Beyond being a loan originator, Valley Partners is also able to refinance loans, with some able to secure low interest rates through SBA loans, he adds, which have been hovering just above 2%.
“If you have real estate payments that are ballooned and you’re facing that, the refi with a 504 might be an option,” he says. “That can go up to a $13 million project and we can extend that maturity out to 25 years with the rate locked in. It can be really advantageous right now to at least consider refinancing hard assets.”
With its name change came a renewed focus on developing partnerships and expanding its offerings into new areas. Regionally, it has worked with the Lawrence County Regional Chamber of Commerce to get in touch with businesses in that Pennsylvania county. Since 2004, Valley Partners has been authorized to work in Lawrence, Mercer and Beaver counties.
“It’s a matter of being more active in the community and being more involved with economic development agencies and interacting with the bankers,” Louk says.
Adds Nero, “It can be talking to CPAs. They know when their clients need financing and can refer them to us. We try to get involved with organizations that we know can help clients.”
Participating in trade associations and conferences can also help to expand Valley Partners’ footprint. Through the National Association of Development Companies, the organization can get in touch – “It’s almost like a cold call,” Louk says – with other agencies in Ohio and across the country. Already, Miller adds, the agency has working partnerships with colleagues in Cleveland.
In those partnerships, she says, the organization offered Paycheck Protection Program loans, but had a floor for how much money could be requested. For applicants that needed less than that minimum, the National Association of Development Companies referred them to Valley Partners. In total, Valley Partners provided 120 PPP loans totaling $2.3 million.
“We want to partner with anyone we can in order to help the economy grow and create jobs here. That’s exactly what this is doing,” Miller says. “This year, despite everything that’s happened, has been a great year in accomplishing our goals that we set out to address in our strategic plan.”
Pictured: Helping businesses find the right loan products at Valley Economic Development Partners are Terry Louk, director of SBA lending, Teresa Miller, executive director, and Mario Nero, director of economic development lending.