City’s Revolving Loan Fund marks banner year in 2009

City credits fund for job retention

By SCOTT SMITH

Kokomo city officials Wednesday announced a city-managed business retention loan fund closed out a record year, with more than $700,000 loaned to local small businesses.

City director of development Deb Cook said the Technology & Industry Revolving Loan Fund — better known as the Revolving Loan Fund — has had its most successful year in the history of the program.

In 2009, the RLF board approved loans totaling $710,000 to six local companies, helping to create or save more than 90 jobs, Cook said.

“This represents the highest number of companies assisted and jobs created in a single year,” she said. “As a rule of thumb we loaned about $10,000 per job created or kept.”

Loan recipients in 2009 included:

• Frontline Logic Inc., $150,000 to create/save 17 jobs

• Electronic Support Services, $145,000 to create/save 37 jobs

• Neupath LLC, $125,000 to create/save 27 full-time equivalent contractual positions

• Performance Powder Coating LLC, $20,000 to create/save three jobs.

• Link Engineering, $205,000 to create/save 19 jobs

• Touchstone Measurement Services, $65,000 to create/save seven jobs

Prior to 2009, the RLF’s most productive year was 1984, just one year after the program was founded. That year the RLF Board loaned out $400,000 to two local companies.

But the recession has tightened lending, making the RLF more attractive to businesses, Cook said.

And in February, the RLF program became even more attractive to local businesses when the federal government gave the city the green light to lower the interest rate on the loans.

The city of Kokomo was able to offer a 2.5 percent fixed interest rate, which, when introduced last February, was 1 percent below the federal prime, and almost 2 percent lower than the RLF’s previous offered rate.

City officials said this year’s loans also “demonstrated the increasing diversification of Kokomo’s economy.”

Programs receiving assistance included a high-tech data management firm, a powder coating company, a one-stop supplier of engineering services, an accredited metrology laboratory, a manufacturer of packaging products and a contract engineering services firm.

Most recently, in November, city officials announced Neupath LLC, a Kokomo-based contractual engineering firm, would expand its operations with the assistance of a $125,000 RLF loan.

That money will be matched by private financing from Community First Bank of Howard County and Apex Equity Fund II, city officials said.

Another local company used the RLF to survive the loss of their main client.

Founded in 1989, Electronic Support Services, Inc., generated 60 percent of its revenue working with the automobile industry — specifically with Delphi Corp.

However, when Delphi filed for bankruptcy in 2005, that percentage “took a nose dive,” ESS president Roger Polk said in April.

As a result, the electronic-product support company began looking at other markets for its engineering, manufacturing, material procurement and prototype-assembly products.

Not only did ESS find new markets for its products, it also found money to expand the business at 720 N. Webster St.

ESS received a $145,000 RLF loan from the city to provide working capital.

“After 2005, we hit the streets to find new markets and our new niche,” said Polk, who said he plans to hire 20 employees during the next two years to meet his clients’ demands and needs.

Typically, RLF loans operate as “gap financing,” giving businesses some of the capital they’d otherwise have to borrow at market rates. Because the city is willing to back the business through the RLF program, banks are then more willing to provide the rest of the needed capital.

“The Department of Development staff has been aggressively marketing this program by speaking directly to banks, business assistance programs and the businesses themselves,” Kokomo Mayor Greg Goodnight said. “They’ve also worked hard to make it easier for local businesses to apply, by streamlining the application process and working with business owners every step of the way. Clearly, their hard work has paid off.”

Goodnight said the RLF program would not be possible without participation from the private sector. RLF loans in 2009 were matched against $1,775,000 in private funds, provided by business owners and local lenders, including Community First Bank of Howard County, Star Financial Bank and First Farmers Bank and Trust.

“The RLF program is a true private-public partnership,” said Cook. “In addition to development staff, these loans are the result of local business owners who seek to invest and expand their operations, private lenders who extend credit even in tough times, and an extremely active RLF Board who takes the time to consider each loan, and ensure that we are encouraging both prudent fiscal management and vigorous economic development.”

Companies or private lenders interested in discussing Kokomo’s Revolving Loan Fund program may contact Development Specialist Paul Allor at 765-456-7375.

• Scott Smith is a Kokomo Tribune staff writer. He may be reached at 765-454-8569 or via e-mail at scott.smith@kokomotribune.com

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