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Financial fill up: small business loan fuels $12 million Jonesboro venture.

MONEY IS THE FUEL THAT makes business go, and Lone Star Co. has motored down the fiscal highway during the past six years.

Sales for the Jonesboro-based wholesale and retail petroleum distributor have grown from $3.5 million in 1986 to $12 million today.

During that same time frame, Lone Star's payroll roster has gone from nine employees to 65.

A timely $775,000 loan through the Small Business Administration was key to helping jump start the enterprise in 1986.

The financing allowed Al Heringer III to diversify from the seasonal flow of high volume agri-based business to a core of retail sales afforded by convenience store operations.

"It's a good thing we did it," Heringer says. "If we were still heavily into farming customers, we wouldn't be here today."

The company now operates a chain of six convenience stores in northeast Arkansas. Four locations are in Jonesboro, with one each in nearby Harrisburg and Paragould.

During the early 1980s, Heringer became the sole owner of Lone Star after buying out the other family members.

Back then, sales were split 85-15 between commercial and retail customers. Now the ratio has flip-flopped with retail customers accounting for about 90 percent of company sales.

Lone Star's fast-track growth is a recent development, but the company's roots date to 1926.

That is when Heringer's grandfather bought the business from a fellow known by many as "Doc" McAdams, the father of Herbert McAdams II of Union National Bank fame.

At that time, the company consisted of a string of independent gas stations. Heringer has returned the focus to retail operations with a string of pricey convenience stores.

Borrower Friendly

A second SBA loan totaling $890,000 permitted Heringer to build Lone Star's new prototype store, specially designed by CDI Designs of New York.

The 20-year fixed rate loan is divided 50-40 between a lender and the SBA. As the borrower, Heringer ponied up the remaining 10 percent.

The SBA offers a borrower-friendly low-interest rate for its portion of the loan. Lenders are wooed into making a long-term fixed rate loan by a first mortgage position and the lower risk exposure.

The ability to charge an interest rate above the state-mandated usury limit, thanks to a federal override, is an attention-getter for bankers, too.

Lone Star's loans are now both held by First Bank of Arkansas in Russellville, which is controlled by Jonesboro businessman Wallace Fowler.

"You can't afford a mistake at $890,000 a piece, but so far all of our stores have done just fine," Heringer says.

Well enough, in fact, that Heringer has funded the other four projects out of pocket or through conventional loans.

Some of the success can be attributed to Lone Star's innovative use of credit card activated pumps, pioneered by the company in Arkansas 12 years ago.

Lone Star is aggressive in meeting gas prices but more so in going after the competition's clientele, especially big-volume users.

"We actually get out and knock door-to-door for business," says Heringer.

After a phone call to set up an appointment, of course, and the personal touch is even extended to everyday motorists. The crew at Lone Star are unabashed car chasers.
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Author:Waldon, George
Publication:Arkansas Business
Article Type:Company Profile
Date:Jan 18, 1993
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