Peter Kelsey, owner and head baker at Minneapolis-based New French Bakery, has the recipe for business success. “You need dough to bake bread,” he punned, making the point that it takes capital investment to grow a small business like his.
Starting with six employees in a 2,600-square-foot bakery nearly 15 years ago, Kelsey has grown into two Minneapolis locations, $10 million worth of baking equipment. He now employs 250 workers in three shifts, seven days a week. Last year, Kelsey booked about $26 million in revenue and this year estimates he’ll do $30 million.
He describes himself as a big fan of the U.S. Small Business Administration (SBA) that has helped him grow his business with several government-backed small business loans. He recently received an SBA-backed loan as part of a $3 million expansion with new high-volume baking equipment to meet demand for frozen par-baked bread, sold throughout the United States.
Kelsey said his company ships as many as eight truckloads of baked goods a day to 38 states. Eighty percent of New French Bakery products are shipped outside of Minnesota’s borders. While his largest customer is Target, he also ships to Supervalu stores around the country as well as Lunds, Byerly’s, Kowalski’s and several restaurants locally.
He credits the recent SBA-backed expansion with enabling him to retain 150 jobs and create 30 more.
He told his story and offered his bakery as a backdrop over the weekend for a press conference by Sen. Amy Klobuchar, who was highlighting a package of initiatives, currently stalled in the U.S. Senate, that would strengthen the SBA’s major loan programs.
Klobuchar, touring the plant, said the recovery act has “bailed out Wall Street; now it’s time to help Main Stteet.” She was accompanied by Nancy Libersky, Minnesota district director of the SBA, and Marshall MacKay, president and CEO of the Independent Community Bankers of Minnesota.
The Senate is currently debating legislation that would extend federal guarantees on the SBA loans from 75 percent to 90 percent through the end of the year. These provisions, part of the 2009 American Reinvestment and Recovery Act of 2009, expired last month. Although the SBA itself does not make loans, it does guarantee loans made to small businesses by private lenders.
The proposals are part of larger legislation that includes a so-called “doc fix” that would defer a cut in Medicare reimbursements and extend several tax breaks while increasing the tax that oil companies pay into a spill liability fund. The package is stalled over Republican objections to the tax increases, according to Associated Press news reports.
Klobuchar is also pushing separate legislation that would increase from $2 million to $5 million the total amount of SBA-backed loans an individual small business could receive.
The Obama administration has also been pushing on the small-business initiatives, and the president made it the topic of a Friday press conference where he said: “[S]o far, the recovery act has supported over 68,000 loans to small businesses, which translates into nearly $29 billion in new lending. More than 1,300 banks and credit unions that had not made SBA loans since before the financial crisis are now lending again.”
As part of the recovery act, SBA received $730 million to help small businesses, including $375 million to increase the SBA guarantee on the major proportion of loans to 90 percent and to reduce borrower fees on most loans. The funds for these programs were exhausted by November, and an additional $305 million has been provided in four different packages passed by Congress, the last of which supported the programs through May 31. The funding level in the current Senate proposal is still being debated.
