By RICHARD RICHTMYER
Associated Press Writer
May 16, 2008 06:32 am
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ALBANY, N.Y. (AP) — Ken Kerr was trained as a cook when he joined the Army straight out of high school in the mid 1980s.
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This spring, nearly two decades after his discharge, the Buffalo native went into the food business for himself, thanks to a new low-interest loan program for veterans in New York.
His wife, Elizabeth, had been working at the place — Bertha's Diner on Buffalo's Hertel Avenue strip — for years and they talked about buying it when they found out the previous owners planned to sell it and retire, Kerr said.
They looked at traditional bank financing, but the business plan didn't pencil out with the interest rates they offered.
"We probably could have gotten financed, but the numbers wouldn't have worked," Kerr said.
That's when Kerr — who was a city worker — says he stumbled on a press release announcing the state loan program that was posted on a political Web site he frequented.
"That salted it because the interest rate was terrific," Kerr said.
Last month, the Kerrs sealed the deal and took over the diner after borrowing $60,000 at 4.25 percent interest for seven years.
Federally backed business loans are available to veterans in several states, but New York's program is different. It is offered as a sort of partnership between the state's $154.5 billion public pension fund and a lending outfit that specializes in startup, early stage and expanding small businesses.
Together, they've agreed to provide fixed-rate, small-business loans for veterans at below-market interest rates.
The loans are backed by the federal government through a three-year Small Business Administration pilot program that started nationally last summer to help veterans and their family members who want to establish or expand small businesses.
So far, there have been 1,300 loans made through that program.
But most of those loans have been through banks and savings and loans that lent the money at or slightly above prevailing market rates, said Bill Elmore, the SBA's Associate Administrator for Veterans Business Development.
"The New York program is unique in the way it's structured," Elmore said.
Kerr got his loan through the New York Business Development Corp., a lending consortium created by the state Legislature in the 1950s to spur economic development. It borrows money from banks and other financial institutions and re-lends it to small businesses that would have trouble getting bank financing.
The consortium borrowed $5 million from the pension fund for the veteran loan program, and managers have agreed to forgo some of the profits they could have gotten through other types of loans in order to get the money in veterans' hands, said Pat MacKrell, the NYBDC's president.
"While the interest rate is certainly terrific and well below market, the real benefit of the program ... is that it provides access to capital to small businesses that challenge conventional underwriting," MacKrell said.
The loan program is available to New York business owners currently serving in the National Guard or Reserve as well as honorably discharged former active duty members. The maximum amount is $150,000, and interest rates are set at the U.S. Treasury rate plus 1.5 percent.
Under those terms, the rate on a 10-year, $150,000 loan would be around 5.4 percent. That compares with around 7 percent for the NYBDC's other loan programs, MacKrell said.
Kerr said he was looking at a rate near 8.5 percent when he first started figuring out how to pay for the diner.
"Getting any business loan for a restaurant is tough enough, and we really hit it out of the park with this one," he said. "It makes a huge difference."
Despite the favorable terms, so far Kerr is one of only two veterans that have borrowed money through the New York program since it started last November.
MacKrell said the NYBDC is currently considering seven other applications, and they expect increased interest in the program as word about it gets out.
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Photos
Ken and Elizabeth Kerr pose for a photo in front of their diner in Buffalo, N.Y., Thursday May 15, 2008. Ken Kerr got his training as a cook when he joined the Army straight out of high school in the mid-1980s. Last month, nearly two decades after his discharge, the Buffalo native went into the food business for himself, thanks to a new low-interest loan program for veterans in New York. AP Photo