Contractor Loan Fund seeks more applicants

Two years ago, Willie Sanders took a leap of faith, quit his full-time job at Pepsi and put all of his energy into building his hauling company, A-Plus Contractors.

Before then, he had been subcontracting in the hauling industry for years without owning any equipment. In 2014, he was finally able to buy his first dump truck.

Then he hit the same wall that many small business owners face – no access to capital. He was getting multiple job offers, but he had no capacity to grow.

“It’s challenging,” said Sanders, founder and owner of A-Plus Contractors. “When you go into a lending institution, they give you assurities without giving you assurities. They get your credit run, and it always ends up being something. The goal post is constantly moving.”

Then in May 2015, several business leaders launched the $10.5-million Contractor Loan Fund, which offers construction-related loans of up to $1 million to minority and women-owned companies.

The fund’s goal is to increase the number, size and stability of minority- and women-owned construction companies in the region, said fund chairman Chris Reichert, CEO of Stifel Bank & Trust.

In October 2015, Sanders obtained a loan with the Contractor Loan Fund, and he was able to purchase a second truck and add on another employee – taking the total up to five in the company.

Sanders has already paid back the first loan and is applying for his second to grow his fleet to six trucks and add two more employees. Because of the Contractor Loan Fund’s assistance, Sanders believes his company’s revenue has grown 200 percent.

“There’s more demand than I have trucks,” Sanders said. “This is a frenzy for me. We are growing our business to meet that demand.”

In 2016, the Contractor Loan Fund group approved 11 loans for a total of $2.8 million and closed eight loans totaling $1.49 million in commitments, Reichert said. More than 13 active applications are in the pipeline for more than $1.2 million at various stages.

In addition, three applicants leveraged the fund’s loan commitment and guidance to negotiate with their current lenders for additional capacity.

The approved loans thus far have ranged from small working-capital lines of credit and financing for start-up costs on awarded contracts to a much larger credit facility for a well-established contractor who is on the precipice of a tremendous growth opportunity, Reichert said.

One applicant was an electrical contractor who intends to finance the completion of one of the largest projects in its history. In addition, a plumbing company used the funds to purchase supplies and ramp up for two key awarded contracts.

There’s over $10 billion in significant projects on the slate over the next 10 to 15 years, Reichert said.

“We expect for those projects to be performed by an increasing number of minority-owned construction contractors,” Reichert said. “It requires that all of these contractors graduate to traditional banking relationships.”

However, Reichert said they have seen a drop in the number of new applicants, and “are considering multiple approaches for community engagement to create a stronger pipeline.”

Also, some applicants have started but not finished the process.

Adolphus Pruitt, president of the St. Louis City NAACP, said that if it’s the paperwork that scares business owners away, they should understand that the fund’s technical assistance committee is there to help.

“They will work with you to get it all done,” Pruitt said. “They will stay with you to find accountants, if need be. The objective is to get you bankable. They will advise in what you need to do to get your house in order.”

The establishment of the Contractor Loan Fund came one month after St. Louis city’s disparity study was completed in April 2015. The study found that the city failed to employ a fair amount of minority- and women-owned businesses when awarding city contracts for construction jobs from 2007 to 2012. The firm Mason Tillman Associates, which conducted the study, specifically found a disparity in how the city awards construction contracts to African-American businesses, both as prime contractors and subcontractors.

As the firm noted, part of the problem is that these contractors do not have access to capital – and the city should work towards breaking down these barriers.

Pruitt said the idea for the fund was originally part of the Community Benefits Agreement that the contracting community drew up with the Metropolitan Sewer District (MSD) a few years ago. Because MSD is obligated to complete $4.7 billion in sewer improvements over the next 20 years, the agreement ensures that minorities and women will be included in that work.

Later, Reichert approached Pruitt and told him that Dennis Lower, Cortex president and CEO, was also trying to implement a similar fund. They all joined forces, and now 30 entities have partnered to make the fund a reality, including Washington University, Saint Louis University and the City of St. Louis.

“This is a big deal,” Pruitt said. “Cash flow is like oxygen for a business. Without it, it would die.”

Pruitt said the St. Louis Development Corporation (SLDC) sent out letters to push the fund along. Reichert said 90 percent of the $10.7 million came from the private sector, and less than 10 percent from public organizations. The partnering banks – Stifel, Eagle Bank and Trust, Enterprise Bank & Trust, Midland States Bank and Scottrade Bank – raised about 70 percent of the fund.

“The Contractor Loan Fund was one of the only organizations to help us,” Sanders said. “African Americans often struggle with getting loans at traditional lending institutions. I would say the CFL gets nothing but praises from me.”

For more information or to apply, 314-725.5788, email info@clfstl.org or visit http://clfstl.org/.