PROGRAM GIVES MANUFACTURERS LEG TO BUILD ON; LOW-INTEREST LOANS AVAILABLE.

Byline: Enrique Rivero Daily News Staff Writer

When the Chatsworth facility leased by Standard Abrasives Manufacturing was damaged in the 1994 Northridge Earthquake, management decided to buy its own building.

As executives searched for a new location, they learned about a little-known source of financing: the state's Industrial Development Bond program, offering bonds at low interest rates to manufacturing companies with the goal of retaining California's industrial base.

Standard Abrasives recently received approval for $4 million, to be repaid at 3 percent interest. That's far below the 8.5 percent it would have faced from a conventional bank loan, Chief Financial Officer Ken Harrisberger said. He expects the company to save $2 million over the 20-year life of the bond.

``We're growing, and the cost to expand the operation is expensive,'' Harrisberger said. ``This allows us to put our working capital . . . into our people and our facilities to help us continue to grow.''

The program often is overlooked despite the low rates, said Daniel Bronfman, a principal with Santa Monica-based Growth Capital Associates. Standard Abrasives, which hired Growth Capital to help it apply, is one of the few Los Angeles-area companies that have participated, Bronfman said.

The bonds are more widely used in Alameda, Riverside and San Bernardino counties, possibly due to a misconception that they are limited to high-growth areas, Bronfman said. ``It's just a matter of people asking for it,'' he added.

Created through the Tax Reform Act of 1986, the bonds allow manufacturers to borrow money from proceeds of a tax-exempt bond issue. The state set aside $123 million in Industrial Development Bond capacity this year.

The money is available only to manufacturing companies, and proceeds can be used only to acquire fixed assets such as land, building or equipment. Companies must have a minimum $2 million need, and the total cost of the project cannot exceed $10 million.

Bronfman's typical client is a family-run business with 30 to 100 employees and annual sales between $7 million and $25 million. ``Our actual client is usually a pretty modest-sized manufacturing company,'' he said.

Harrisberger said Standard Abrasives originally had applied for the financing in 1997, but the state ran out of money and the application was bumped to this year. The company will use the money to pay off a bank loan it took out to build its new, 75,000-square-foot home, completed in July for $7 million.

Harrisberger said the company will use the savings to expand its work force. ``It's important for us to maintain the momentum we've had in growing the company over the past couple of years,'' he said.

Standard Abrasives has 220 employees at three facilities, including 130 at the Simi Valley headquarters, and the bond money probably played a key role in keeping the company in the area, Harrisberger said. Without it, the company likely would have moved its headquarters to one of its other facilities, in Hesperia and in Brookville, Ohio.

``That was a viable option,'' he said.

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Photo

Photo: (Color) Standard Abrasives CFO Ken Harrisberger displays two of his company's products at its 75,000-square-foot Simi Valley headquarters.

Bob Halvorsen/Daily News