K-WAM Financial Solutions can help you find the mobilization funding to crank up a new contract. Read this article to see how it could work for your firm.
New loan fund to aid small city contractors – A new alternative stream of private financing will allow fledgling construction firms to get started on jobs they win from the city.
By Thornton McEnery , CRAINS
February 11, 2014
Antonio Rivera IV, owner of Bronx-based New Look Construction Maintenance, won a contract early last year from the city’s Department of Homeless Services that was going to be a game changer for his small business, but there was one major problem.
“This was a huge job for me, and my bid won it fair and square,” recalled Mr. Rivera, who began his company four years ago. “But the cost of materials alone was going to take getting a loan, and since Hurricane Sandy the credit crunch has made getting these loans very, very tough.”
The de Blasio administration is trying to do something about that. As part of a new $3.5 million loan program that the Department of Small Business Services is set to announce this week, companies like Mr. Rivera’s will potentially have an alternative short-term financing source, allowing them to get to work faster and continue to grow in a challenging lending environment.
All of the money is private, most of it from Goldman Sachs’ 10,000 Small Businesses program, which is committing $2.8 million to a mobilization loan fund for small construction businesses. It will be augmented by $700,000 from the Surdna Foundation. BOC Capital Corp., a nonprofit financial institution that specializes in community development, will manage the fund over the next three years, making low-interest, one-year loans in the range of $20,000 to $150,000 to small firms that have secured New York City-based contracts but are having difficulty finding financing to proceed.
“This funding is very much aligned with the aim of our program,” said Cristina Shapiro, vice president of the Urban Investment Group at Goldman Sachs, which operates 10,000 Small Businesses. “We are very excited that this money is going to reach a critical subset of small businesses in New York City.”
For Small Business Services, the fund means that there is a ready partnership available to help small construction businesses pay for contract-related labor and equipment costs, something that has been particularly difficult to achieve for companies involved with the city’s Build it Back program, which is supposed to help homeowners rebuild after Hurricane Sandy.
Contractors like Mr. Rivera have waited up to seven months for payment from the city on Build it Back contracts. For smaller companies like his, the delay can be perilous and is a growing cause of concern for the future of the program. By creating a quicker stream of bridge financing, the new Small Business Services fund could make Build it Back more appealing to contractors.
“We are excited that the Department of Small Business Services partnered with the private sector to help local businesses take advantage of available Sandy recovery projects,” the Build it Back program’s director, Kathryn Mallon, said in a statement. “Helping the local economy while we rebuild is a win-win.”
A resurgent Build it Back would surely be welcomed by new Deputy Mayor for Housing and Development Alicia Glen, who was until last month the head of the very same Goldman Sachs urban investment group that is seeding the fund. Officials at the investment bank told Crain’s that Ms. Glen was not personally involved in the planning of the loan, but she was aware of it.
According to the Department of Small Business Services, BOC Capital will work closely with applicants, whose eligibility hinges on a few factors. Companies must be authorized to do business in the city, be at least two years old, and have two or more employees and a clear plan for growth. They must also have annual revenues between $100,000 to $7 million and be in possession of a secure construction contract.
For small businessmen like Mr. Rivera, the new funding stream has already paid off. Not only has he moved on his city building contract with a loan from BOC Capital, he has repaid the loan in full.
“The people at BOC sat with me and got me what I needed,” he said. “They are now very important people in my life.”