John Giegel retiring from Wisconsin Business Development Finance Corp.
By John L. Campbell, for SBT
John Giegel, who built an organization that has become a major player in Wisconsin business financing, is retiring. But don’t expect him to fade away from the scene.
It may just be that now is the time for the 56-year-old founder and president of the Wisconsin Business Development (WBD) Finance Corp. to move on and create some other way to foster business development in Wisconsin.
His impact here has been huge. While others bemoaned the lack of business growth capital in Wisconsin, Giegel did something about it, making WBD the fourth-largest certified development corporation in the United States for SBA financing – a major accomplishment considering the fact that the non-profit entity’s reach is limited to the state.
"I’ve never considered this a job; it’s more like a mission," said Giegel, whose accomplishments beg the question: What’s he planning to do in the future? He doesn’t claim to have any hobbies, other than a desire to travel, and he’s always done that. So, what’s he going to do with his free time?
Giegel started WBD in 1981, between the Carter and Reagan administrations. At that time, the prime rate was 21% and inflation was around 13%. Not a propitious period in which to start a new business. But those conditions didn’t seem to deter Giegel. For years he had been involved in various economic development projects, first with the City of Milwaukee and then at the state level.
During his startup year, he continued working for the Wisconsin Department of Economic Development. At that time, Gov. Lee Dreyfus had a discretionary loan fund for economic development.
"Our cost of money was only 16%," said Giegel, referring to the funds available for the SBA’s 501 program loans in 1981. His first loan was to the Grandview Motel in Sister Bay. "That was in 1982," Giegel explained, "and we could make 25-year loans at that time." Today, the limit is 20 years.
WBD offers Small Business Administration (SBA) loan programs not directly available through private lenders. To reduce the lender’s risk on mortgages, WBD takes a secondary position, providing up to 40% of a project’s cost with an SBA-guaranteed loan. Business owners must provide at least 10% equity. The SBA funds cannot be used for working capital or refinancing. To fill that need, if necessary, WBD seeks out other types of financing from federal, state or local sources. SBA projects, often referred to by their statutory 504 designation, provide fixed rate financing for up to 20 years and a maximum amount of $1.3 million, terms not available from private lenders.
Larger projects, those exceeding SBA limits, may require packaging loans, where WBD draws together more than one lending participant.
Without WBD interceding, a lot of jobs would be lost or never created.
Since 1981, it’s estimated that WBD has helped create more than 30,000 jobs in Wisconsin, participating in more than 2,000 business projects with about $1.5 billion in financing. Those loans are all based on fixed-asset values: land, buildings and equipment.
WBD records show that 25% of its loans have been for start-ups.
"We’ve dealt with virtually every bank in the state from Ashland to Prairie du Chien, from Door County to Milwaukee," said Giegel, explaining that WBD is one of only four certified development corporations in Wisconsin. "We do about 95% of the SBA activity. In 1990 we had 12 employees and today we have five offices throughout the state and 28 employees."
Headquartered in Madison, WBD has offices in Eau Claire, Oshkosh, Stevens Point and Waukesha. Over the past five years all but four counties have benefited from an SBA project. In 2002 Dane, Waukesha and Outagamie counties led with 19, 12 and 11 projects respectively.
Historically SBA 504 projects have been the tools for expansion with new buildings and equipment. Last year, 30% of SBA loans were to purchase existing buildings.
Giegel grew up the son of an Air Force serviceman. His father retired with the rank of colonel, and John lived for long periods in places like Okinawa and Germany.
Accustomed to international travel, Giegel spent nine months in South America on a rural development project after graduate school. "In Venezuela we were trying to take raw land and produce sugar cane, rice and dairy products," Giegel explained.
He majored in geography with a minor in economics at California State-Northridge. Later, he earned his master’s degree at UW-Milwaukee.
In 1972, Giegel took a job with the economic development department for the City of Milwaukee. Later he moved to Madison to work on economic planning for Wisconsin. While working for the state, Giegel conceived the idea of a non-profit-certified development corporation to meet the financial needs of small businesses.
The first employees were John and his spouse, an unpaid employee. During those lean years he tapped into the pool of bright young graduate students at the university for credit analysts and potential loan officers.
Today, the corporation has a quarter-billion-dollar loan portfolio. Its revenue comes from originating fees and a small percentage for servicing loans. For the fourth year in a row it has closed more than 100 new projects totaling over $50 million, financing estimated to have saved and/or created more than 1,000 jobs.
The corporation’s board of directors is made up of people with economic development and banking experience. One of its current functions involves finding a replacement for Giegel, a search that has produced five potential candidates.
"One never really retires from this type of business," said Giegel, vague about his plans for the future, hinting that he’d like to crawl out of the box limiting WBD to SBA projects in which it now participates.
He’d like to see small businesses with access to more creative financing, out-of-state money perhaps, and more small banks participating in the lending process.
Whatever Giegel elects to do, you can be sure he will fill a financial need, scratch an itch not presently being taken care of for small businesses and entrepreneurial projects.
Oct. 17, 2003 Small Business Times, Milwaukee