SBA loan a game-changer for entrepreneurs

Valley men buy Surprise-area golf courses thanks to fed’s help

Coyote Lakes Golf Course in Surprise features 18 holes over 6,213 yards and is known among serious golfers in the West Valley as an affordable spot to play.

Golf Digest even bestowed a four-star rating on it in its seventh edition of its “Best Places to Play.”

So, it’s no surprise Dave Ashton, the owner of The Golf Club at Johnson Ranch in San Tan Valley, wanted to expand his golf footprint by purchasing the West Valley course at 18800 N. Coyote Lakes Parkway when it became available last year.

The only problem was to complete the multi-million-dollar deal, he would have to organize a group of investors to help come up with the 30% down payment that most conventional business loans require.

Fortunately, a loan officer friend of his told him about a special loan the Small Business Administration offers to people like Ashton who own what are called “special purpose properties” like golf courses, hotels, gas stations and more.

“It’s made our lives so much better,” Ashton said.

Thanks to securing $10.8 million in total project financing, Ashton and a business partner were able to buy Coyote Lakes, and six weeks ago, completed the purchase of Sun City’s Palmbrook Country Club, 9350 W. Greenway Road.

Ashton said the best part for him was he didn’t have to bother with private investors these last two times.

The SBA 504 loan program is slowly becoming an option for owners who are looking to purchase and occupy a building or land, but maybe don’t have the investors to help them raise the capital for the hefty down payment.

The program works by allowing owners to buy those eligible properties at below-market, 25-year fixed interest rates, which is important during a time of drastically rising interest rates. Plus, borrowers only have to put down 10% to 20% of the loan, which is a big savings.

“That’s certainly valuable,” said Geoff McGivern, senior vice president of business development for TMC Financing, who facilitated the SBA 504 loans for the men to buy Coyote Lakes and Palmbrook.

The men purchased The Golf Club at Johnson Ranch the traditional way with a conventional loan. That also meant throwing down a 30% down payment, which is quite a sum for a multi-million-dollar purchase.

“The people are wonderful, but I put so much pressure on myself to perform to provide them with a return,” Ashton said. “It put enormous pressure on us everyday to perform because we cared about our investors a lot.”

TMC Financing is a certified development company based out of California, but McGivern works out of Phoenix. McGivern said the company’s mission is to provide economic development throughout its trade area of Arizona, California, Nevada and Oregon.

Part of McGivern’s job is to educate businesses on the SBA 504 program.

“It’s really our bread-and-butter program to meet our mission,” he said.

McGivern also deals with the SBA 7(a) Loan for businesses operating in underserved areas.

“It’s all about providing access to capital for small business owners for the local community,” McGivern said.

Besides golf courses, TMC Financing has hooked up dozens of special purpose properties across Phoenix and the state with SBA 504 loans.

Some of the establishments were Arizona Wilderness Brewing, Brewsters and Culvers.

More generally the types of businesses McGivern works with include hotels, gas stations, car washes, boating companies, contractors, mortuaries, fitness gyms — and even a winery with a famous owner.

Last year, McGivern helped secure a loan for Maynard James Keenan, the lead singer of Tool, who has lived in Jerome since the mid-1990s.

McGivern worked with a bank to help Keenan expand his winery operation in the Jerome and Cottonwood area.

“Most of my job is educating, whether it’s the bankers or the direct owner users of the product, and how the product works,” McGivern said. “The overall market intelligence has elevated in the last decade. which is great for business owners and great for banks.”

 

SBA 504 loans can be used for what the Administration calls a “special purpose property.”

Those are ones that:

• Have a limited market of commercial buyers.

• Have a unique design, layout, or construction materials.

• Due to its features, is limited to a specific purpose.

McGivern’s job is to call banks to check to see what clients of theirs are looking to buy fixed assets. To help Ashton, he leaned on his relationship with Phoenix Metro Bank, now Alerus Financial.

Ashton said there are some drawbacks to the program, although the benefits still outweigh the negatives.

The main problem, he said, is the cumbersome process that can take up to three months with hundreds of documents requested to be eligible for the loan. Ashton equated it to buying a house “times 10.”

“Banks are really afraid of risk of underwriting a business that will succeed or fail,” Ashton said.

He said TMC Financing does its best to ”move the process along.”

“They really want you to be successful and be able to do the acquisition,” Ashton said.

Another drawback to the loan are some big fees to deal with, including a 1% loan origination fee — again a big sum for a multi-million-dollar purchase.

Despite all that, Ashton said he’s now unsure how any small business is able to make big purchases without the help of SBA 504.

“You have to be patient,” Ashton said. “You have to accept that part of the process is difficult, laborious and painful, but you have to know it’s worth it in the end because the alternative is not owning your business at all.”

Ashton and business partner Jeff Lundgren are considering buying more golf courses across the Valley, thanks to the SBA loan.

“It’s completely changed my life and Jeff’s life,” Ashton said. “Nothing of that would have been possible without the SBA.”