Precision Wire ‘scrambling’ to get funds after shutdown
Precision Wire Technologies landed a big contract late last year to make stainless steel wire for a cable manufacturer.
Because the customer needs a lot of wire at once, Precision Wire Technologies needs to buy a lot of metal. The Fort Wayne company had made all the necessary preparations to apply for a $75,000 bank loan that would be backed by the U.S. Small Business Administration.
But parts of the federal government shut down Dec. 22 when Congress and President Donald Trump could not agree to a spending plan. Those parts included much of the SBA, which furloughed workers and stopped accepting and approving loan applications.
Precision Wire Technologies’ prospective financing was left in limbo.
“We are now scrambling, trying to find other means to dig up this cash in order to purchase the material we need to fulfill this brand-new customer that could be a huge benefit to the organization in terms of our growth and profitability and sustainment,” David Faust, chief executive officer of Precision Wire Technologies, said last week.
“I basically have a couple of weeks to get everything figured out,” Faust said, adding that he might have to turn to another lending source : at a much higher interest rate : to fill the new order.
Faust, whose company employs fewer than 20 people, had plenty of company. The National Association of Government Guaranteed Lenders said that small-business borrowers had, on average, lost access to $500 million a week in SBA-backed loans since the government shutdown began, threatening the creation or retention of 14,000 jobs.
Faust was interviewed before Friday’s announcement by President Donald Trump that he and congressional negotiators had reached an agreement to reopen and fund the government for three weeks while Republicans and Democrats try to produce a fiscal blueprint for this year and decide whether it should include money for a southern border wall favored by Trump and the GOP. The Republican-controlled Senate and the Democratic-run House approved the deal later in the day, and Trump signed it.
But the temporary federal spending extension “is not changing anything about my approach,” Faust said Friday afternoon.
“From everything I’ve heard, the anticipation is that because the SBA has been shut down for well over a month now, there’s going to be a substantial backlog” of loan applications, Faust said. “I don’t anticipate them getting to our loan and crunching through that backlog in a three-week period of time.
“At this point, I’ve got to play the better-safe-than-sorry card, which is assume that they’re not going to get to it,” he said about his application. “I’ve got to find a different means to find the cash. If they do get to it, great : worst-case scenario is I find the cash from an alternate means, just pay them back faster.”
And there’s always the risk of another government shutdown if Congress and Trump don’t agree to a long-term appropriations deal by Feb. 15.
“I’m lending zero confidence of getting the SBA loan approved by the time I need it,” Faust said.
Faust is a client of BOD Financial Group owner Noah Smith, who packages, processes and services SBA loans for banks and borrowers. Smith had said before Friday’s deal that the SBA “is going to be massively swamped when it opens back up” and that businesses might not see their loans go through for a few weeks.
He reaffirmed Friday that the SBA will see “a bombardment” of financing applications to consider when the agency opens this week. A process that typically takes two to five business days will last three or four weeks, he predicted.
“They have a fixed number of people,” Smith said about the SBA. “There’s going to be a backlog.”
Democratic members of the Senate Small Business & Entrepreneurship Committee issued a letter Wednesday asking SBA Administrator Linda McMahon to identify steps being taken to “quickly and equitably work through the growing backlog of applications.”
“Because capital is the lifeblood of our nation’s small businesses, it is critical that the SBA have a plan in place to address the growing backlog of loan applications so that it can be quickly implemented once the government reopens,” the senators wrote.
Smith said that for business owners who cannot wait long for loan approval, “their alternatives for funding are going to be a lot higher priced. It’s going to put pressure on the small business.”
Maximum interest rates for the most popular SBA loan program range from 7.75 percent to 10.25 percent. The loans appeal to participating lenders because the SBA covers most losses if a borrower defaults.
The SBA said in October it had guaranteed more than 601 million was approved for 1,518 borrowers in Indiana : including 107 in Allen County, 21 in Kosciusko County, 15 in DeKalb County and single digits in each of the other counties of northeast Indiana.
Joe Cavacini, a commercial lending and business development executive with Huntington-based First Federal Savings Bank, said he has been working with six customers seeking SBA approval of loans ranging from 400,000. The money would be used to acquire businesses, finance expansions and refinance debt at lower interest rates.
“These loans will either provide new revenue opportunities or reduce costs” for the borrowers, Cavacini said last week in an email, “and each day of the shutdown delays these opportunities.”
He said at the time that “not knowing when things will open back up, they cannot plan properly.”
First Federal Savings Banks customer Jon Canfield, owner of Total Precision Cabinetry of Fort Wayne, said he had been counting on an SBA-backed loan for capital to make light fixtures and signs for the stores of a global customer.
“It’s definitely advantageous to small-business owners to go the SBA route, without a doubt,” Canfield said in a phone interview. “I’ve done it before; it’s worked out great.”
Total Precision Cabinetry, which employs 13, has enough reserve cash to meet the demands of the fixtures customer as the company awaits SBA approval, Canfield said.
“It’s not like the government shutdown is going to put me out of business if this loan doesn’t happen,” Canfield said. But he said the faster the SBA reopens and processes his application, the better.
“We’re small. We’re a family-owned company,” Canfield said. “The SBA’s really come in handy for us.”
Smith said his SBA clients, who include Canfield, need capital “to help continue their growth strategies and their growth opportunities.” Without access to the SBA, “they’re stuck,” he said.
Faust, also a customer of First Federal Savings Bank, has obtained SBA-backed financing in the past for Precision Wire Technologies.
“We rely very heavily on those dollars,” Faust said, “so when they don’t come, it completely impedes growth.”