Lenders leave expansions in the lurch (VIDEO)
Published: December 10, 2009
Tags: American Recovery and Reinvestment Act, Doyle, expansion, Helios, Helios USA LLC, Koeppe, lenders, loans, manufacturing, Nature Tech, Nature Tech LLC, Northwest Side Community Development Corp., Scampini, Snyder, ZBB Energy
Private lenders slammed shut their vaults this year just as energy companies were reaching for money to expand their businesses.
The timing undercut a state focus on rebuilding the manufacturing industry on the shoulders of companies such as ZBB Energy Corp., Menomonee Falls. That firm’s $4.5 million expansion, and others like it, have stalled without traditional bank loans.
But the company, which makes equipment to store energy from wind turbines and solar cells, will get its project going thanks to Thursday’s low-interest loan from the state.
But state aid is not enough to overcome the lending industry’s reluctance to invest in projects for energy-efficiency and conservation companies, said Scott Scampini, executive vice president and CFO of ZBB.
“It’s immensely hurting it,” he said. “And besides the loan market, a lot of people aren’t investing in things like this because they can’t get the loans.”
The lack of lenders, combined with the state’s goal of using energy companies to bolster Wisconsin’s manufacturing industry, led the state to dedicate $53 million in stimulus money to a revolving-loan program, said Gov. Jim Doyle. Doyle visited Milwaukee and Kohler on Thursday to announce the program’s first eight projects, starting with loans to ZBB, Helios USA LLC and Nature Tech LLC, both based in Milwaukee. Helios manufactures solar cells, and Nature Tech makes building insulation from newspapers and other recycled material.
Doyle likened the focus on energy companies to Wisconsin’s agricultural shift from wheat to dairy in the early 1900s.
“We not only can survive as a strong manufacturing state,” he said, “we can excel.”
But, at least this year, success relies on public money. Nature Tech’s $3 million project to renovate a building in Milwaukee includes an $800,000 state loan and a $640,000 loan from the U.S. Department of Health and Human Services. The Northwest Side Community Development Corp., a Milwaukee nonprofit organization, funneled the federal money to the project.
The project was ready to go a year ago, said William Sellars, Nature Tech chairman and CEO, but could not start because there were no available loans.
“Banks quit lending to startups,” he said. “They ran away from startups like the plague.”
Howard Snyder, executive director of the Northwest Side CDC, was in Washington, D.C., this week meeting with health and human services officials to drum up more loan money. Although HHS leaders want to support energy projects, he said, there is a lot of competition from CDCs to get the money so it can be used on local projects that can’t get private loans, he said.
“It’s sort of made the CDCs and the not-for-profits in the community stick out,” Snyder said, “because we are not the bank of last resort. We’re the bank of only resort.”
Paul Koeppe, CEO of ZBB Energy, said the loans help more than his company. ZBB, he said, contracts with other manufacturing companies for parts, and many of those companies, such as automotive manufacturers, are suffering.
“That’s gone down,” he said. “We also had a lot of farm agricultural equipment that was made in this state. But now, I would say that the hottest market is renewable energy.”
Koeppe said ZBB has 30 employees, but after the expansion will create 175 new jobs for ZBB and companies with which it contracts.