For over 50 years, KC HiLiTES has been a symbol of outdoor freedom, adventure and performance. When the company required additional space, purchasing a building in a community that aligned with its core values was the optimal solution for maintaining their independence and providing resources for growth. By utilizing the SBA 504 Program, the company was able to purchase 1751 S Thompson Street in Flagstaff, AZ for $4,217,260 with just a 10 percent down payment and a 25-year fixed interest rate.
KC HiLiTES was founded in 1970 by Pete Kim Brown, an avid outdoorsman, who aspired to ‘light up the night’ for off-road adventures after realizing current off-road lighting fell short of his needs. Alongside his wife, Carol (hence ‘KC’), Brown worked in their garage, oftentimes with neighborhood housewives, retrofitting aircraft lights into sturdy housings, and forever changing the landscape of off-road culture.
KC HiLiTES products were immensely popular in the 1980s, appearing in classic films like The Goonies and Back to the Future. They quickly outgrew their garage operations and moved to Williams, Arizona where their headquarters remained for 53 years. In 2015, CEO Alan Wang’s family, long-time KC HiLiTES partners, bought the business from Michael DeHaas, Pete’s son, to continue the legacy.
Wang learned of the SBA 504 Program and knew that was the most advantageous way for KC HiLiTES to purchase a building.
The SBA 504 loan allows business owners to purchase fixed assets, such as real estate or equipment, at long-term, below-market fixed interest rates. SBA 504 loans are fully amortized over a period of 25 years and most businesses qualify for just ten percent down payment.
“Ten percent down is huge,” says Wang. “It allowed us to keep more cash flow for operating and growing the business. By saving capital from the low down payment, we were able to invest in R&D, invest in our people, hold inventory, the list goes on. The rates were very favorable as well.
“Overall, all the components of the 504 loan beat the conventional financing options. The whole 504 package made this purchase possible.”
John Rockwell, vice president of business development facilitated the $4.2 million deal on behalf of TMC Financing.
“There are not a lot of properties in Flagstaff that fit the needs of KC HiLiTES. When their ideal facility became available, we had to move fast to meet the seller’s deadlines,” explains Rockwell.
Wang sites TMC Financing’s guidance as a major factor to complete the transaction quickly.
“John was very nurturing in terms of all the gears and knobs that come with this transaction. He and the TMC Financing team coached us through it – and did it very quick,” states Wang.
“One of our core values is that the quality of relationships drives the quality of results,” Wang continues. “When we met with John and Ron Pak [vice president SBA Business Development Officer] with Citi, it felt like the right people to do business with. We knew they were people we could trust to take us through that process and close the deal.”
The SBA 504 loan program is a financing partnership between a borrower, a conventional lender (in this case, Citi Bank), and a non-profit Certified Development Company (CDC), like TMC Financing. The unique structure of the SBA 504 loan is what enables small business owners to obtain the most attractive terms when purchasing real estate. The financing package looks like this:
- 10 percent contribution from the borrower as a down payment
- 40 percent from the SBA 504 financing, facilitated by TMC Financing (up to $5 million)
- 50 percent (or more) from a conventional lender
“The biggest thing for a company like us is freedom,” states Wang. “Owning our building means having the ability to be flexible. It’s huge for any business to be able to dictate your own future.”
If your business is located in TMC Financing’s service area, contact us to learn more. And if your business is located outside of our service area, try the SBA’s Lender Match tool to find a qualified CDC near you.