We find ourselves in the middle of one of the greatest wealth transfer periods of all time. Those with wealth must decide whether they want to make transfers, and if they do, they must decide how much, to whom, when and in what structure?
The economy had yet to hit bottom when Tom and Jan Peters began planning the expansion of their Fort Collins Brewery three years ago. Still, a bank loan for the $3.9 million project was hard to come by. At first, they didn’t think of turning to their credit union because they thought of credit unions as providing loans to private individuals, not commercial enterprises.
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Then they met Herb White, vice president of Business Services & PR at Public Service Credit Union. He came to their place of business – just like a small-town banker in an old movie – and he explained that PSCU was moving in the direction of providing loans to small businesses.
“It wouldn’t have been possible,” Tom Peters says now, as the Fort Collins Brewery is slated to complete its new 30,000-square-foot facility in the “Brewery Triangle” near New Belgium Brewing Co. and Odell Brewing in June. “He looked at us personally. What’s the right thing to do rather than the safe thing? He believed in our project, our ability.”
Ken Hamko, who took over the 50-year-old Widow McCoy restaurant in Loveland in December, tells a similar story. He was turned down for a loan by Home State Bank before securing financing through PSCU.
“To me, they made my dream possible,” he said. “They had faith in me and the history of the restaurant.”
White knows that finding financing is difficult for small businesses right now, and the credit union is in an excellent position financially to fill that need for capital. While banks struggle under increasing pressure from federal regulators, credit unions, as tax-exempt member-owned cooperatives, operate under a different set of regulations and with a different mission.
“We truly believe credit unions are here to help people when they need it, and we need to help people more than ever right now,” White said. “We’ve never seen a bigger need to help members more than now. We’re open, available, doing loans. We’ll look at everyone.”
Most banks will look at the numbers, see a business’ trends are down and that’s it. White said PSCU recognizes everyone’s trends are down in this climate.
“We’ve got to look beyond that, help them through that crisis,” he said. “We have money to lend out. If we needed to borrow money, we have the ability. Delinquencies are probably not where we want them, but they’re well in line with economic conditions.”
The business lending side of the PSCU operation kicked into gear three years ago – just in time for the Fort Collins Brewery. White admits that restaurants still tend to be some of the most likely lenders to default, but the restaurants PSCU is financing are unique.
“The biggest thing for us (in deciding to finance the brewery) is Tom and Jan,” White said. “They were incredible people to work with. They truly believed in the project, put their whole heart and soul into this business and we can see that. It was going to be beneficial to them, us and the community. They know their business in and out, hit projections within 1 percent. Everything came into play, and it seemed like a great project.”
SBA loan part of financing
PCSU, which entered the Fort Collins market when it purchased the defunct Norlarco Credit Union in February 2008, is financing the project together with the Small Business Administration 504 loan program that works with real estate ventures. PCSU takes a mortgage for 50 percent of the project cost, SBA for 40 percent, and the Peterses come up with the remaining 10 percent.
The building includes 4,000 square feet of lease space for a restaurant, and 7,500 square feet of warehouse space for industrial tenants. Peters is in talks with a distillery for some of that space. The restaurant section is also still available for lease.
A community room with seating for 60 people will be located between the restaurant and tasting room for private functions or group meetings. There will also be additional office space for management, sales staff and production on the second floor, and plenty of ceiling height for larger fermentation equipment.
White said it’s been clear that the city of Fort Collins is also a big supporter of the project. “This was the smoothest I’ve ever seen a project go through at city,” he said. “Putting them closer to New Belgium and Odell creates a little brewery tour for the city. The location’s perfect. The north side of Fort Collins is where growth is. It seems like a good idea to get in on the ground floor.”
Last year, when the longtime owners of Widow McCoy were preparing to retire, Ken Hamko was already working with the SBA but also needed to secure bank financing to buy the business and the real estate. He went to Home State Bank, which had been the restaurant’s bank for 18 years. “It took them three months of back and forth and then they said no,” Hamko recalls. “It delayed the whole process.”
Someone with the SBA suggested Hamko go to PSCU. “Within a week, we were ready to rock and roll,” he said.
When Hamko took over the business in December, he kept on 25 of the restaurant’s longtime employees.
It was already a successful business, so it made perfect sense to finance, White said.
“The credit union comes out and visits us at our place of business and wants to see the operation, the way banks used to be,” Peters said, whereas banks in this climate want you to come to them with your plans, 10 years in business and 40 percent down.
That’s not realistic for many small businesses, which is why Peters hopes the credit union can continue to help those businesses grow, along with the local economy.