Thursday, January 7, 1999

By Kathryn Bender, Star-Bulletin
Benedict and Joanne Palmeri, left, and her son and
daughter, Sean and Lara Haitsuka, relax in their downtown
beauty salon that was started with the help of a Small
Business Administration loan.

Isles’ SBA loans
on record pace

The flat economy has more
entrepreneurs and lenders
seeking the agency's help

By Jerry Tune


With Hawaii's flat economy, an increasing number of lenders and fledgling entrepreneurs are turning to the federal protection of the U.S. Small Business Administration for start-up business loans.

"Lenders use the SBA loans for their more risky businesses and now they see more loans in the gray area," said Andy Poepoe, SBA district director for Hawaii and Guam.

In the fiscal year ending Sept. 30, the SBA made 272 loans in Hawaii, a 26.5 percent increase from the 215 loans in fiscal 1997, which, in turn, was up 26 percent from 158 loans in fiscal 1996. Since 1991, the annual total of SBA-backed loans in Hawaii has increased from $11.4 million to $30.4 million last fiscal year. The SBA now has 823 loans with a value of $84.8 million in its Hawaii portfolio.

Poepoe predicts record numbers for fiscal 1999, which has seen more than 100 loans in the first quarter alone, and continued growth for the next three years.

"In a jurisdiction of our size, after comparing with some mainland communities, I think that SBA loan volume can get up to 475-plus loans per year at about $55 million per year," he said. "I would like to see our local banks crank up to this level. Attaining this loan activity per year would be very helpful to the small business community in Hawaii."

An SBA-backed loan enabled one local entrepreneur to start her downtown beauty salon, but it took a year of work to get in a position for loan approval.

Joanne Palmeri, who opened the Image Beauty Emporium & Salon at 126 Queen St. last month, received a $72,000 SBA-backed loan at 10.25 percent interest through Bank of Hawaii.

Palmeri, who had a background in advertising sales but no experience operating a business, said Bank of Hawaii advised her to get help from an accountant firm to complete the business plan necessary for the loan.

"My husband, daughter and I went to a four-month class at Grant Thornton and they told us how difficult it is to get a start-up loan," Palmeri said.

"You have to really want your own business," she added.

But Palmeri said she persevered because she wanted to provide a better future for her daughter Lara Haitsuka, who worked in retail sales and merchandising at Liberty House, and her son, Sean Haitsuka, a former waiter. The three now work together at the salon, along with the part-time help of Palmeri's husband Benedict Palmeri, the owner of J&J Beauty Supplies and a former owner of four beauty salons in New York.

Joanne Palmeri's four-inch thick business plan called for $90,000 in start-up costs for the first three years. Palmeri had to put up $18,000 in order to get the remaining $72,000 in the loan. Palmeri said the SBA backs 80 percent of the loan but that her Kaneohe home is also collateral.

She also had to put up an additional $20,000 prior to the loan for various costs and as a deposit for the construction work to remodel the downtown space. She got the $10,000 deposit back and the SBA loan will cover the construction costs.

"I found that you need to be an expert juggler in starting a business," Palmeri said. "There's a thousand big and little decisions you constantly need to make from a hundred different sources."

Palmeri's loan was one of 80 SBA-backed loans totaling $8.8 million that Bank of Hawaii processed in the last fiscal year.

Once loan applicants qualify and have their business plans in place, processing SBA-backed loans can move quickly.

"We try to make our decisions at the bank in three days," said Marcy Fleming, vice president and manager of the business branch at Bank of Hawaii. "We also try to be proactive with our clients with their business plans."

Approval from SBA normally takes less than two weeks. Banks decide what interest rate to charge but SBA has a ceiling of 2-1/4 percent over the prime rate reserved for the bank's best commercial customers.

The maximum amount for a SBA loan is $150,000 and Poepoe said they are not for all entrepreneurs but are reserved for those considered risky.

Joyce Kaaihue, Bankoh's vice president and community development lender, said that SBA-backed "micro-loans" are available under $25,000.

She said these often are used by women and minorities with the help of others, such as the Immigrant Center in Kalihi.

Entrepreneurs looking for more information on federally backed loans can call the local SBA office at 541-2990.

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