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Car Dealer Puts EDC Loan to Work in South County

Car Dealer Puts EDC Loan to Work in South County

Finance: Expansion Leads To Hiring 55 New Staffers

BY MIKE ALLEN

Well-known auto dealer Tony McCune was able to expand his National City Chrysler Jeep dealership thanks to a little-known federal loan program administered through the South County Economic Development Council.

To obtain the three-year loan of $380,000 carrying a 4 percent annual interest, McCune’s project had to pass muster with the council, and then the U.S. Department of Health and Human Services.

McCune is a founding member of the South County EDC, a past president, and still sits on its board of directors, but the organization denied those facts influenced his project’s approval.

“There was no insider dealing,” said Doug Perkins, the EDC’s executive director. “Tony McCune did not participate in any of the selection process nor any of the votes.”

Perkins said two previous businesses that obtained similar loans through the federal program were not EDC members. Another company the council will soon submit for approval to the program is also not a member.

The EDC made $400,000 low-interest loans to Knight & Carver Yachts in National City in 1998, and to NLP Furniture Industries in Chula Vista in 2000.

The funds for the business loans were granted to EDC by the U.S. Department of Health and Human Services. The program funds between 40 to 75 projects annually making its selection from a field of about 500 applications from all over the nation, Perkins said.

Before a business receives approval from Health and Human Services, a project must show it will create new jobs that provide career advancement potential. Other factors taken into consideration are the company’s overall financial strength because matching funds are required, and assurance that the new jobs will last at least three years, Perkins said.

Good Deal For All

Health and Human Services granted the South County agency $500,000 for the McCune loan, the same amount granted for each of the two earlier loans. The additional money on each grant is used to administer and document the loans over the term.

The McCune loan permitted the car dealer to expand his facility on National City Boulevard by 13,000 square feet. The dealership expanded its auto body repair and painting area, a fact that led to hiring 55 new staffers, Perkins said.

“This is a win-win venture,” McCune said. “I’m able to expand my business and create job opportunities for South County residents.”

McCune was also able to snag an interest rate that equals the 4 percent prime lending rate, usually reserved for only the highest-quality borrowers.

“There’s not many people who we have borrowing at prime,” said Tom Swanson, CEO of Escondido-based Community National Bank. “They are very long-term customers with solid deposits, so it sounds like he’s getting a pretty good deal.”

Swanson said while every loan transaction is unique, the floor for a similar commercial loan at his bank would likely start at 6 percent.

Banks cannot provide better terms or conditions on loans to management or directors by federal regulations.

“You’re stretching things,” Perkins said to questions about whether McCune’s selection smacks of favoritism. “Should a member of our community in good standing be penalized if they participate in helping their community?”

Kurt Chilcott, CEO for CDC Small Business Finance Corp., a San Diego-based lender of guaranteed SBA loans, said he heard of the federal grant/loan program being administered through the South County EDC.

“They should be congratulated for having applied for the money,” Chilcott said.

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