Gold in scrap metal.

JAY LITE'S SALVAGE COMPANY WEATHERED THE ROUGH TIMES THANKS TO A LINE OF CREDIT - NOW BUSINESS IS BOOMING

Sometimes, having a small business in a tough part of town can be an asset - just ask Jay Lite. In 1993, Lite opened a scrap metal recycling business in a depressed part of South Central. By early 1996, he realized he would need a loan to keep his fledgling operation afloat. But the big banks turned him down because his company grossed only $450,000 the previous year.

But the fact that Sun-Lite Salvage Inc. was a small, startup business in a neighborhood desperately in need of economic activity proved an asset when he approached the Community Lending Corp. for a $250,000 line of credit. The corporation is a private non-profit corporation that offers debt capital to small businesses in L.A. County.

To be eligible, businesses must be located in an area where 20 percent or more of the population lives below the federal poverty level - a condition that applies to South Central.

Lite credits Community Lending Corp.'s loan program with allowing him to buy enough scrap metal to keep on hand - and thus help build a loyal customer base.

Lite said the loan program was especially helpful in building up his business, though he would prefer a credit line with a mainstream bank, where interest rates likely would be lower.

"They don't want to get involved with small businesses anymore," said Lite, who is paying six points above prime.

CLC vice president Venez C. Davis said the corporation charges from 3 to 7 points above prime, with rates based on the amount of collateral a business has and the riskiness of the loan.

Lite's sales last year were $800,000, and his work-force has grown from three employees in 1993 to 12 employees today. He expects about $1.2 million in revenues this year.

Sun-Lite Salvage, located on a 33,000-square-foot lot near Manchester Avenue and Alameda Street, specializes in buying scrap metal from industrial manufacturers, government auctions and other scrap dealers; cutting it down; and then reselling it to foundries and smelters.

Sun-Lite focuses on smaller foundries rather than large smelters. Lite said many dealers will only sell scrap to smelters in containers containing 40,000 pounds of metal. The smelters then melt down the scrap, roll it into sheet metal and sell the sheet stock.

Lite said he will sell in smaller quantities to small foundries, which account for about 40 percent of his sales. Selling to smaller foundries means that Lite and his workers often have to cut down their scrap metal into smaller pieces to serve the foundries, whose melting pots are usually small.

Dennis Haddox, purchasing manager with Oxnard-based Image Casting Inc., said he uses Sun-Lite for scrap because the metal is of a high quality and Sun-Lite will cut it down to the size needed, Sun-Lite will also keep the cut-down pieces in stock for him, he said, while others will take two to three days to cut the metal down.

"If I need it quickly, I'm in trouble," Haddox said.

Lite said that his strategy for making money focuses on buying raw scrap at a low enough cost so that he can sell at a low, but profitable, margin.

"My profit is made in the buying," Lite said. "That's my strategy: process it and sell it."

George Pellin, president of South L.A.-based Pellin Automotive Products Co. Inc., one of the dealers Lite buys scrap from, said that Lite has been shrewd, but fair, when buying metal from him.

"Because he's a smaller company, he's willing to work on some smaller margins," Pellin said. "One of the assets he has going for him is he knows where to sell merchandise."

Lite said that one of his key business beliefs is to own all of his equipment.

"I'm always a firm believer in getting good equipment to do the job," Lite said, adding that he bought all his trucks for cash, and that he built his own metal cutter from used parts when buying the same equipment new proved too costly.

When he first opened his business, Lite's trucks were broken into almost every night, with criminals taking anything left inside. "They would steal anything that wasn't nailed down," he said.

But Lite found a solution to protect his investments: He installed two fences around his yard, the first a standard, protective fence, and the second once electrified with 7,000 volts and connected to a police alarm.

Spotlight 

Sun-Lite Salvage Inc.

Year Founded: 1993

Core Business: Scrap metal processing and recycling

Top Executive: Jay Lite, president and chief executive officer

Sales in 1993: $300,000

Sales in 1996: $800,000

Employees in 1993: 3

Employees in 1997: 12

Goal: Build the business to the point where it is making $3 million to $5 million a year so that it will be self-sufficient

Driving Force: The challenge of making something from nothing