May 13, 2024

This paid piece is sponsored by Dakota Business Finance.

Obed Garza can’t quite wrap his head around the fact that he’s this year’s South Dakota Minority-Owned Small Business of the Year.

“I’m still in shock by it,” said Garza, owner of Garza Insurance Agency, who was honored recently by the South Dakota office of the U.S. Small Business Administration.

His firm meets a growing need in Sioux Falls and beyond, offering bilingual access to a range of insurance services, including auto, home and business.

Twelve years into business ownership, he’s also more recently a building owner. Last year, Garza purchased a building at 2310 E. 10th St. “and business has been going like a snowball,” he said.

“Most, about 90 percent, are Hispanic, but I have all kinds now because of the culture. I have people from Africa and all Central America. So I explain coverage and what it means and why it’s required, and we are super busy. It’s a blessing but also a big challenge because sometimes the phones ring off the hook.”

Still, the building is larger than he needs, so he’s renovating additional suites with the hope of renting them to other professionals such as accountants and attorneys who might focus on serving the area’s growing diverse community.

“What a great role model,” said Lynne Keller Forbes, CEO of Dakota Business Finance. “Not only did he buy a building and is helping the Hispanic community navigate insurance, but he’s showed a passion for lifting up additional businesses and could become a one-stop shop with a team approach to offering needed services.”

Through his commercial real estate broker, Ryan Ammann of NAI Sioux Falls, and his lender, Central Bank, Garza connected with Dakota Business Finance, which helped him secure an SBA 504 loan in purchasing his building.

The 504 program allows qualifying borrowers to secure a loan with as little 10 percent down, rather than the typical 20 percent.

“It’s very restricted to buildings, equipment and leasehold improvements,” Keller Forbes said. “But when we work with you on a 504, it allows you to have less money into the deal upfront, maybe buy when you wouldn’t have been able to or keep additional funds for working capital.”

For Garza, “it’s been a blessing, really,” he said. “It was awesome and a big help for us. They were very helpful, and they are always calling to see if I have questions because I’ve never done this before. It’s a dream come true, and I still can’t believe it, but it’s mine.”

Denise Cotter and Michelle Marino can relate to that feeling.

The owners of Houndstooth House home design and furnishings business were the 2023 South Dakota Small Business Persons of the Year, awarded by the SBA.

“That really was huge,” Cotter said. “It gave us exposure, No. 1, but also confidence that we did something right over the last 20 years.”

With the win, they received access to a peer group of other business owners nationwide as well as direct business coaching locally through the SBA.

“It was game-changing for us, there’s no doubt,” Cotter said. “So many small-business owners are passionate about their industry and what they do, but you don’t get the training on the business side along the way.”

They also worked with Dakota Business Finance to complete 504 loans on two buildings, including their most recent at 101 W. 37th St.

“They poured their heart and soul into this,” Keller Forbes said. “I love that they just have so much energy. They started out of the back of a van and drove around, so to go from that concept to this, they just kept believing in themselves. They took this opportunity to open something up and make it a reality, and they just hit it out of the park.”

One year later, Houndstooth House is holding its own in a challenging retail environment and seeing strong growth in its home design projects — “we’ve accelerated five times from last year,” Marino said. “Jaime (Wood, SBA South Dakota) and Lynne have been cheerleaders through the whole thing, constantly helping us move forward.”

The 504 loan, which they did in partnership with Dakota Business Finance and CorTrust Bank, was critical to the business’ ability to expand, she said.

“With 10 percent down, that allowed us to use extra funds we needed to do work on the building and do upgrades that were really necessary,” she said.

The experience “was amazing,” Cotter said. “What a team they have — professional, diligent, just helping us understand what they needed from us and making it very simple to turn everything in. Even though we maybe didn’t understand everything, it never felt over our heads. And they’re still involved with wanting us to be successful.”

About the 504 program

The 504 loan is a flagship program of the SBA, one of the most-leveraged, government-guaranteed lending programs for small businesses nationwide.

The 504 program “reduces risk for both the lender and the borrowers and enables business owners from all backgrounds and industries – from agriculture to retail to manufacturing – access to capital that otherwise wouldn’t be available to them,” said SBA South Dakota district director Jaime Wood.

Overall lending data for all SBA loan programs indicates continued interest for small-business startups and growth, Wood said.

“Driving across the state in any direction, there are many businesses who exist because of SBA 504,” she said.

Since 2023, the SBA has approved almost 100 South Dakota 504 loans for a total of approximately $88 million.

“An additional key benefit of a 504 loan is the high-quality customer-service experience provided by SBA-approved certified development companies who partner with SBA commercial lender partners to facilitate the loan,” Wood said.

Since 2009, Dakota Business Finance has been the state’s No. 1 CDC.

In using an SBA 504 loan, business owners still work with a traditional lender in addition to Dakota Business Finance. The bank provides 50 percent of the financing, and the SBA issues bonds to cover its 40 percent, which are fixed for 25 years. This provides borrowers a typically lower-than-market interest rate fixed for 25 years that traditional financing cannot provide. Given the high interest rate environment, this allows a business to really hedge its bet on the interest rate market.

“That’s helpful because you won’t have to worry about repricing, and it becomes a very stable loan,” Keller Forbes said. “Additionally, there are instances where we can help with refinancing, which we anticipate could be in demand soon as some existing conventional loans begin to reprice.”

Right now, traditional financing is hovering around an 8 percent to 8.5 percent interest rate, she said.

“The SBA rate changes every month, but right now, we’re hovering around 6.5 percent, so if you blend the two, it becomes a much better rate.”

The program is open to businesses with less than $20 million in net assets and less than $6.5 million in net income after taxes.

“So it’s a really high threshold when you consider SBA’s portion of the project is able to go up to $5.5 million,” Keller Forbes said. “While we are able to work with startup businesses, we traditionally do not see a lot of business startups; a lot of times we’re seeing existing businesses that have been leasing space and are ready to own or expand.”

Dakota Business Finance can serve borrowers anywhere in South Dakota, Iowa and Minnesota, as well as a few counties in Nebraska. “We prefer you start with reaching out to one of our loan officers, and we can talk you through if it’s a good fit, or you can begin the application process online,” Keller Forbes said. “We’re happy to work with your banking partner if you have one, or we can give guidance based on our experience and knowledge of your industry.”

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