Base closings: the last roundup - includes related article on Small Business Administration loans for defense-related companies

Nation's Business, April, 1996 by Michael Barrier

AS Zullinger and members of his re-use committee have toured other military facilities in Pennsylvania slated for realignment, he says, he has encountered no shortage of good ideas. The most important lesson he picked up from his peers in other communities, he says, is to "keep an open line of communication with the commander at the installation. That comes up every time." Zullinger talks with Letterkenny's commander "at least weekly, and sometimes more often."

"Everybody in this business is willing to share information," Zullinger says. "I guess misery loves company."

Loans To Smooth The Transition

Defense cutbacks can have a direct impact even on small businesses that are nowhere near a base being closed. Many small firms that have been heavily dependent on defense contracts--often as subcontractors to larger firms--have found their revenue drying up as the military has shrunk.

In October 1995, the Small Business Administration and the Defense Department launched a three-year, $1 billion loan-guarantee program designed to help such defense-oriented small businesses make the transition to civilian markets.

The program, known as DELTA (for Defense Loan and Technical Assistance), is administered by the SBA, although the Pentagon supplied the funds to guarantee the loans. The money is being funneled through two existing SBA loan-guarantee programs, including the workhorse 7(a) program. The SBA's guarantee under a 7(a) DELTA loan can be as high as $937,500--up from the usual $750,000 for other 7(a) loans--and that means, since the guarantee covers 75 percent of a loan, that the loans themselves can be as large as $1.25 million.

The SBA is developing what Gregory Diercks, the national program manager for DELTA, calls "a directory of technical-assistance providers, who have agreed in writing to provide special assistance to DELTA clients. Sometimes a loan is the last thing a client needs; what they really need is engineering assistance or marketing assistance." That directory is expected to be available by late April.

DELTA applicants must have derived at least 25 percent of their revenues for the previous fiscal year from defense contracts (prime or subcontracts), in addition to meeting the normal eligibility requirements for SBA guaranteed-loan programs. More information is available from SBA field offices and from the SBA answer desk, 1-800-8-ASK-SBA (1-800-827-5722).