When William Waldren wanted to start a small business to provide a co-working space for other small businesses in the community, he needed about $125,000 for furniture and equipment.
Waldren, who plans to open Hudson Business Lounge in Milwaukee’s Third Ward this month, was able to take advantage of a new loan special being offered by Brown Deer-based Bank Mutual Corp. to help small businesses get started and grow.
He received a $50,000 loan from Bank Mutual and a $75,000 loan from a leasing partner, Advantage Leasing Corp. in Milwaukee. Hudson will offer office space, collaborative areas and a coffee/wine bar for self-employed individuals.
“It seemed like one of the main reasons they did the loan was they really believe in the concept,” Waldren said. “Because we’re obviously a startup, they really were the only people that kind of looked at what our business plan is and looked at how we’re going to effect and influence the success of other small businesses.”
Bank Mutual recently announced new small business loan specials for new money loans that provide significantly lower rates than Bank Mutual’s usual commercial loans, with most about 1 to 1.5 percent lower than a month ago, said John McCaffrey, sales manager of small business at Bank Mutual. The idea is to offer a year-end rate that will entice potential loan applicants, he said.
“The BMO/M&I merger is going to help with this, so we’re trying to attract those customers away from the competitor,” McCaffrey said. “We’ve seen an increase in loan volume.”
While Bank Mutual saw less loan volume during the Great Recession, the bank’s volume picked up in early 2011 and has been strong this year, he said. The bank has completed about 25 percent more loans in 2012 than in 2011.
“We’re seeing a lot more — businesses are through the hump now,” McCaffrey said. “They still have needs to borrow, and they’ve got to find a bank that has the ability to lend them money.”
Under the Bank Mutual specials program, business customers are eligible for a $25,000 to $200,000 term loan or line of credit. Rates for amounts of $25,000 to $49,999 are prime +1.99 percent for lines of credit and 3.99 percent to 4.99 percent for term loans. For loans from $50,000 to $200,000, the line of credit rate is prime +0.99 percent and the term loan rate is 3.49 percent to 3.99 percent or, for new vehicles, 4.50 percent to 4.99 percent.
Term loans are to be used for equipment, vehicle or real estate purchases, with a maximum 20-year amortization on real estate. Lines of credit have a 12-month maximum term, interest-only payments and no prepayment penalty.
“Because we’re a lean startup (the special fees mean) we can have our cash flow where we need it and a little more flexibility,” Waldren said. “To anticipate that we don’t have a huge payment due every month is kind of a relief.”
Jeff Steggeman is another small business owner who was able to take advantage of the Bank Mutual loan special program. He owns Steggeman Holdings, which purchases rental properties and commercial buildings.
“It’s a really good time to buy real estate right now,” Steggeman said. “It’s really been interesting to do what I’m doing and then at the same time, knowing what’s going on with the economy.”
Under the Bank Mutual program, Steggeman received a 3.99 percent fixed loan and a five-year term amortized over 20 years. He also received a line of credit at prime +0.99. Without the special program, Steggeman would have paid 5.99 percent interest on the loan and prime +2.99 on the line of credit, said Mary Gustafson, bank office manager at the Brookfield Square Bank Mutual location.
Steggeman now has two bank mutual loans, totaling $300,000, which he is using to purchase residential properties in Bayside and Glendale.
Business activity is picking up, which bodes well for continued loan applications, McCaffrey said.
“The economy in the state of Wisconsin is getting better,” he said. “More businesses are forming and more businesses are going back to normal levels before the recession hit and they’re hiring people.”