Small Business Is MVEDC’s Business

YOUNGSTOWN, Ohio — The Mahoning Valley Economic Development Corp. is proof that government – federal, state and local – has an important role to play in directly priming and sustaining the economy, in this case in eastern Ohio and western Pennsylvania.

Founded in 1979 in the wake of the collapse and retrenchment of the steel industry, the agency has helped more than 2,000 businesses in its 11-county footprint and in so doing created or retained more than 25,000 jobs in Ashtabula, Trumbull, Mahoning, Columbiana, Geauga Portage and Belmont counties in Ohio and Mercer, Lawrence, Beaver and Franklin counties in Pennsylvania.

Despite its record of success, its achievements and capabilities remain relatively unknown, says its second executive director, Mike Conway, who prefers to identify MVEDC by its initials. He spells out the references he makes to his agency, “Em Vee E Dee Cee.” He rarely calls it “Med Vec” although almost everyone else does.

“Medvec?” Conway says dismissively. “Sounds like a Russian wrestler.”

Those who know MVEDC best, the bankers who work closely with Conway and his staff, lavish praise on the agency. Tim Shaffer, senior vice president of Farmers National Bank and head of its East division commercial lending operations, sits on the board of MVEDC’s mini-loan fund. He works with other bankers in assessing the applications the agency makes.

“Not a week goes by that one of our lenders doesn’t meet with one of their lenders,” Shaffer says, to discuss the structure of a credit a small business needs. He devotes at least three hours a month to MVEDC, he says.

Frank Hierro, Mahoning Valley regional president of the Home Savings and Loan Co. and former chairman of the MVEDC executive committee, has worked with the agency more than 20 years. He devotes anywhere from four to 10 hours a month on MVEDC-related matters.

“They work diligently to help small businesses,” Hierro says. “They work with their [14] bank partners to create a package that helps the business and helps the bank make the loan. They’re especially good at SBA 504s.”

The U.S. Small Business Administration’s 504 program allows a small business to finance a commercial mortgage or equipment of up to $20 million at a fixed rate, the real estate over 20 years, equipment up to 10 years. The business owner must make a minimum down payment of 10%, the bank lends 50% of the amount, and a community development corporation – here MVEDC – 40%. The SBA guarantees the bank that it will repay up to 85% of the funds it advances should the business default.

On June 14, MVEDC announced the 504 rate is 4.232% for a loan of up to 20 years for business owners “looking to purchase, renovate or construct real estate for their business (must be 51% owner occupied).”

Besides the 504 program, MVEDC is rolling out its SBA-Community Advantage program, the SBA approving the agency’s efforts to increase the number of SBA 7(a) lenders to reach underserved communities. Under 7(a), a small business at any stage, from startup to mature, can borrow up to $5 million for nearly any business purpose. A 7(a) usually carries a lower rates than a bank, can be repaid over a longer period and be combined with other sources of financing.

The small-business owner must provide 20% equity for an exiting business, 30% for a startup and have a minimum credit score of 640.

“Ninety percent of what we do is with bank partners,” Conway says. But MVEDC will extend, and has extended, a loan as small as $500, an amount a bank would handle with a credit card at a cash advance rate.

Year-to-date, MVEDC is keeping pace with the loans it extended last year. As of April 11, it had closed on loans to seven companies that total $547,000. As of June 1, it has a pipeline of pending loans approved of $14.7 million to 23 companies.

The man who started MVEDC, Don French, invited the woman who today is chairwoman of its executive committee, Diane Sauer, to join its board in 2000. “It does so much good work for the community: the loans they’ve made, the jobs they’re created, the jobs they’ve saved,” says the president of Diane Sauer Chevrolet in Warren.

Her interest has focused on “the Grow Biz Fund [] and helping small businesses.” Grow Biz extended 54 loans that totaled $3.54 million to 48 businesses in 2015, bringing that portfolio to $15.64 million, Conway reports.

The Grow Biz Fund, notes senior lender Mario A. Nero, “was established to provide capital to small businesses in the region.” MVEDC leaves it to the commercial banks and one credit union, Seven Seventeen, to extend lines of credit to the companies that need such financing.

The economic future of the Mahoning Valley lies with small businesses, Sauer says. “It takes an organization like MVEDC to help fund them.”

The Youngstown Warren Regional Chamber does a good job encouraging and recruiting businesses to come or start here, Sauer says, but “MVEDC is needed to help arrange financing. They’ve made a difference in the economic climate.”

That difference in the economic climate extends well beyond being a lender. MVEDC is a landlord – it owns two industrial parks – and two short line railroads that serve those parks.

Between them, Youngstown Commerce Park in North Jackson and Warren Commerce Park in Warren host 24 companies with 1.29 million square feet under roof and employ more than 900, Conway reports. The two parks occupy 411 acres.

Where the park in North Jackson “is pretty much built out,” he says, “Warren has 20 acres left” in its 100 acres.

In North Jackson, the Ohio Utilities Protection Service broke ground for a new building last week (See page 23).Only a six-acre lot remains.

The short lines – the Youngstown & Austintown and Warren & Trumbull – “experienced a very active year” in 2015, Conway says and this year is on track to be nearly as busy. Last year, the railroads, in partnership with the Genesee and Wyoming, carried 699 cars filled with both raw materials and finished goods to the CSX and Norfolk Southern lines for delivery throughout the United States.

Plans have been developed to improve the Warren & Trumbull, with the improvements funded by the fees MVEDC charges per car.

State involvement with MVEDC includes the Ohio Regional 166 Loan program, aimed at manufacturers, wholesalers and distributors. The fixed-rate loans of up to $500,000 are based on the prime rate and provide the borrower with as much as 45% of its purpose; bank financing provides the rest. For every $50,000 borrowed, the business must create one job.

The funding the federal government provided in 1979 for MVEDC to make loans has been repaid and as those loans have been repaid, with interest, the agency has lent that money out. Infusions from the state of Ohio have added to the funds MVEDC can lend. Funding from the federal and state government has allowed the MVEDC loan portfolio to grow threefold since its creation, Conway says.

A look at its revenues shows that interest and fee income makes up 80% of its budget.

While MVEDC was created to help the manufacturing sector and the companies that supply it get back on their feet – and it continues to lend to this sector – an examination of its borrowers shows the scope of diversity today. Among them are towing companies, car washes, restaurants, hotels, beauty salons, auto dealerships and day care centers.

“We’ve seen an increase in women- and minority-owned businesses,” Conway says. “And we’ve seen more women in manufacturing.”

MVEDC administers the Procurement Technical Assistance Center for Trumbull, Mahoning and Columbiana counties, a program that helps businesses win government contracts. In 2015, it helped 25 businesses secure more than $3.5 million in federal contracts, Conway says.

A former chairman of the executive committee, George D. Beelen, has been on the MVEDC board 33 years. “I’m the second-longest serving [member],” he says.

Beelen, a history professor at YSU when he joined, recapped its history and cited a lengthy list of community leaders who donated their time and talent. (All board members serve without pay.)

Beelen was invited in his capacity as a trustee of Austintown Township.

What has allowed MVEDC to succeed, he says, is, “This organization plays straight and is transparent.” Under French, MVEDC took a “low-key approach that was effective.”

Conway wants to raise the profile of the agency while making it more transparent and accountable.

MVEDC “has been very effective, very positive,” Beelen says, in large measure because of the caliber of its staff. Conway has increased the MVEDC budget for staff training and development and is preparing for a new opportunity.

“We’re in the midst of an exciting partnership with the Youngstown Business Incubator, Tech Belt Energy Innovation Center and Youngstown State University to create Valley Growth Ventures LLC,” he says, which would be “the Mahoning Valley’s first venture capital fund of scale.”

Pictured: The staff of the Mahoning Valley Economic Development Corp. includes Norma Webb, Greg Lutz, Mario A. Nero Sr., Mike Conway, Wendy Walters and Teresa Miller.

Copyright 2024 The Business Journal, Youngstown, Ohio.