Partners' dream for business takes flight with SBA-backed loan: fast loan processing helps seal the deal for fixed-base operator.

When Larry Thompson and Mitch Nimey wanted to get a new aviation business off the ground three years ago, their bankers turned to the Small Business Administration for a loan guaranty to fuel the takeoff.

The two owners of Preferred Jet Center LLC at Cobb County's McCollum Field in metro Atlanta have been real estate investors, pilots and friends for years. In 2001 they decided that combination would work perfectly in the purchase of a fixed-based operator that served corporate and other private aircraft.

"We looked at it as a real estate deal with a hobby attached to it and a way we could enhance our friendship," Nimey says.

The FBO they set out to buy was built in 1995 and sold three years later to a Florida company. Three years after that, it was in receivership.

The partners competed with several bidders for the operation. They lost to a higher bid, but when that deal fell through, they were back in.

"The county wanted us to close on it quickly," Nimey says. "They didn't want it to be out of service."

The FBO provides fuel, hangar space and other services at the busy airport.

The partners worked with Riverside Bank in Marietta to finance the purchase and obtain funds for remodeling and renovations. That's where the SBA came in.

"We got a 90-day bridge loan from Riverside, and they handled the application for the SBA loan," Nimey says.

The bank already had his and Thompson's financial data and credit history since they had financed real estate deals there. The pair's real estate businesses are separate, with Thompson involved in property development and Nimey focused on residential building and sales.

Tyler Dixon, Riverside vice president in commercial lending, says the size of the purchase required two loans. After arranging for Zions Bank in Salt Lake City to carry a $1.2 million first mortgage, Riverside financed a $1.35 million second mortgage, partially guaranteed under the SBA 7(a) loan program.

Why turn to the 7(a) program?

"If we get a loan request and the project or term of loan is outside our loan policy, we look at the SBA," Dixon says, citing the longer maturity period for a 7(a)--up to 25 years for fixed assets.

The borrower deals directly with the lender and the SBA guarantees it. The note carries a fluctuating interest rate, adjusted periodically based on the prime rate.

"The value of an SBA loan is that it provides high-leverage, long-term financing with terms favorable to the borrower," Dixon says.

The 7(a) is the SBA's highest volume loan program. Financing under 7(a) can be used for a variety of business purposes, making it the SBA's most flexible loan program.

"Lenders sometimes won't make a loan because of the terms" says Terri Denison, SBA Georgia district director. For example, she says, a conventional loan for working capital may have a three- or four-year term. With an SBA guaranty, working capital can be loaned for up to seven years, resulting in lower monthly payments, usually fully amortized.

Preferred Jet's loan funded the purchase of the McCollum FBO's assets. Those include a main terminal, a crew lounge, office space subleased to a flight school, a maintenance facility and five hangars. The hangars have 84,000 square feet of heated space to lease to base customers, including a rescue helicopter operation, and to accommodate transient flights.

Preferred pumps about a million gallons of fuel a year and last year took in revenue of nearly $2 million.

"We have a lot of overhead," Nimey says, "but we were making a profit after six months."

He and Thompson make sure they remember the operation is not just to fuel their hobby. Both Thompson and Nimey have commercial and airline transport licenses, frequently fly together and even attend flight training together. Although Thompson flies out of McCollum and keeps an office there, he leaves most of the decision-making and operations oversight of Preferred Jet to Nimey.

Pilots' comments volunteered on an industry Web site confirm that Preferred goes an extra mile to serve incoming crews.

"By far the most efficient, courteous FBO I have ever encountered in the South/Southwest" wrote one in November. Another in the same month wrote, "These folks roll out the red carpet for you ... literally."

Nimey says if Preferred continues its success, it will be because of this focus on customer service.

Plus, he adds, favorable loan terms helped launch Preferred Jet Center in the first place, thanks in part to the SBA 7(a) program.

PREFFERED JET CENTER, LLC

Larry Thompson, Mitch Nimey

1800 Airport Road, Kennesaw, Ca. 30144

[phone]

www.preferredjet.com

Year founded: 2001

Annual revenue: Nearly $2 million

Employees: 22

SBA-backed loan: 25 years, prime plus 1.5 percent

About this program ...

What: Loans to small businesses unable to get conventional financing. Private-sector lenders' loans guaranteed by the SBA.

Amount: Maximum loan amount is $2 million. SBA guarantees up to 85% of each loan.

Step 1: Contact local lenders, who should be familiar with program. Borrowers must have repayment ability from cash flow, management capability, collateral, owner's equity.

Purpose: Proceeds can be used for most business purposes, including buying real estate, construction and renovation; acquisition of machinery and equipment; purchase of inventory; working capital.

Terms: Terms vary but maximum loan maturity is 25 years for real estate and equipment and generally seven years for working capital. Interest rates are negotiated between borrower and lender but subject to SBA maximums. Visit www.sba.gov/ flnancing/sbaloan/7a.html for more information.

Other info: 67,300 7(a) and Supplemental Terrorist Activity Relief (STAR) loans were approved in fiscal 2003 for a total dollar volume of $11.3 billion.