For Cindy and Mike Miller, the U.S. Small Business Administration’s
504 Loan Program has allowed access to vital
funding to buy facilities and equipment without diluting ownership in
their family-owned business, International Mulch Co.
The St. Louis-based company, which makes rubber mulch in a rainbow of
colors from recycled tires, is 68 percent owned by the Miller family,
with the rest owned by a network of friends and business associates.
Mike serves as president, while Cindy is vice president. Their son Tim,
32, is director of operations, while son Tom, 30, is director of
“We probably would have had to give up more ownership of the company to bring in more capital,” without the 504 program, says Cindy Miller,
who, with her family, has used the SBA program four times to grow the
business. Revenue hit $18.8 million last year and is projected at $21.5
million for the current year.
SBA 504 loans are for fixed assets such as buildings and equipment.
They are structured so that the borrower contributes 10 percent of
costs, while a private lender such as a bank contributes 50 percent and
the SBA provides 40 percent. The SBA portion comes through a so-called
certified development company, a community-based SBA partner set up to
support economic growth.
“From our standpoint, it makes the banks more comfortable because of the rapid growth of the company,” says Mike Miller. “It’s a lot of exposure for a bank to have to carry all the debt.”
The Millers owned a home-building business when they founded
International Mulch Co. in 2000. “We thought it could be a great
opportunity for us to start another business,” says Mike Miller.
The company did just over $536,000 in sales its first year. By 2006,
sales had grown to $7.5 million, and the company posted its first
profit, as consumers took to rubber mulch and all its advantages, which
the Millers are quick to point out.
“You don’t have to water as often, and there are no food sources for termites and other insects,” says Cindy Miller. “You don’t have fungi growing, there’s longevity, and the colors look great. Plus it’s great from the recycling aspect.”
International Mulch products are sold nationwide by retailers,
including Lowe’s, Ace Hardware and Menards. The company works with the
U.S. government, which uses its mulch on military bases. Among
high-profile users are Six Flags theme parks and Epcot.
The company produces about 60 million pounds of rubber mulch per year
and to date has recycled 300 million pounds of tires, the Millers say.
The Millers first used the 504 loan program in 2004 to buy the
company’s property in St. Louis, which includes manufacturing and
distribution facilities. With a funding total of $2.2 million, Missouri
State Bank loaned $1.1 million, while the company put in $220,000. The
SBA’s portion was $940,000 through the CDC, the Business Finance Corp.
of St. Louis County, an affiliate of the St. Louis County Economic
In 2008 the company opened a second manufacturing and distribution
facility near Cleveland. In 2009, when it wanted to expand with a
manufacturing and distribution facility in Godfrey, Ill., it turned to
the 504 program again and received two loan packages, one for the
facility and one for equipment.
Funding for that facility totaled $2.5 million. Southwest Bank
stepped up with 50 percent of funding while the Business Finance Corp.
of St. Louis County put in just over $1 million. The Millers’ portion
was $250,000. Some $1.5 million for equipment came from $750,000 from
Southwest Bank, $615,000 from the Business Finance Corp. of St. Louis
County and $150,000 from the company.
Finally, in 2010 when the company needed money for five presses to
mold new products — rubber splash blocks and rubber pavers — some
$500,000 in funding was a no-brainer. It arrived through the 504 loan
program, with M&I Bank providing $250,000, the company putting in
$50,000 and the Business Finance Corp. of St. Louis County providing
just over $200,000.
“It’s a great, great program,” Rick Palank, president and CEO of the
Business Finance Corp. of St. Louis County, says of the 504 loan
“Typically, especially in this economic environment, a bank by itself
will not lend 90 percent of value. The second major advantage is that
on the 504 loan, the interest rate is extremely low. And it’s a fixed
The loans are for 10 years on equipment and 20 years for real estate,
says Palank. As of March, the 20-year fixed rate was 4.5 percent, and
the 10-year rate was 4 percent. Rates change monthly.
“A small-business owner can get into a building or expand a building
with generally only a 10 percent down payment,” says Dennis Melton, SBA
district director based in St. Louis. “It can put them into a property
ownership position much quicker.”
Along the way, International Mulch has received funding for working
capital from the Saint Louis Business Development Fund, now known as
Regional Growth Capital. The entity is a for-profit company owned by 28
In 2003, International Mulch received two investments of $100,000
each from the Saint Louis Business Development Fund. In 2005 it received
$370,000. In 2009 it got $500,000.
“The investments are great for a company like International Mulch Co.
because they’re a rapidly growing company and keep needing more and
more capital for growth,” says Palank. “A lot of companies will sell off
equity. You really don’t want to do that because you’re diluting
Reprinted from Beginners to Bigshots by the American City Business Journals.