The Great Recession had all but stopped lending by banks, but Millcreek-based technology company FatPipe Networks Inc. had reached a point in its development where it had to keep growing.
"We couldn't afford to slow our expansion during the recession here. Other areas of the world were still growing," said Sanchaita Datta, who co-founded the communications network firm with her husband Ragula Bhaskar.
So they relied on the only money available, a high-interest loan from Salt Lake County's Economic Development Revolving Loan Fund, to expand their company, whose networks ensure that customers' Internet and other lines of communication still function if the main system crashes.
"We were able to expand in Europe and southeast Asia," Datta added, and to make strategic acquisitions that further aided FatPipe's ability to flourish and provide more employment for Utahns.
Salt Lake County Mayor Ben McAdams cited FatPipe on Monday as a prime example of a business that benefited from the type of "bridge" loan provided by the county's revolving loan fund, which has been around for 25 years, in its current form since 2005.
It's now a fund with greater resources. Six banks American Express, American Express Centurion, CIT Bank, GE Capital Bank, GE Capital Retail Bank and Zions Bank each pledged to contribute $1 million to the fund, raising its balance to roughly $7 million.
That money will be used to provide loans of 14 percent (for four years) to 16 percent (five years) to help high-tech companies that don't quite have the collateral necessary to secure a conventional bank loan, but have the potential to create jobs in low- to middle-income communities if they can get the $25,000 to $250,000 they need to move a project forward.
"This is not a long-term source of financing, but will get them over a hurdle and into the private market," said McAdams, contending the arrangement not only benefits emerging companies and jobseekers but also "the banks [that] will help create companies that likely will borrow from them in the future."
"We want to be involved in creating good jobs in the community," said GE Capital Bank official Craig DeMordaunt of his bank's interest in making a $1 million contribution.
Tim Loftis, chairman of the revolving loan fund's board, said his group structured the program to fill a void between the small, start-up loans ($5,000-$25,000) available to companies through the Utah Microenterprise Loan Fund and standard bank loans.
Nine loans have been made under program criteria, he said, noting that none of the recipients have defaulted. Two applications are in process and a dozen more companies are waiting to sign up, Loftis added, contending recipients have created 500 jobs and generated $17 million annually for the county's economy.
Loan interest rates have to be high because borrowing ventures are admittedly a little risky, McAdams said.
In FatPipe's case, Bhaskar said a high rate was not a deterrent. "If we could get 20 percent growth compared to a 14.5 percent loan," he added, "that's great for us."
To manage the expanded fund, McAdams appointed five new trustees to its board: Rachel Bowcutt, American Express; Kelly Hartnett, CIT Bank; Daren Jakeman, GE Capital Bank; Ching Xu, GE Capital Retail Bank; and attorney Ezekiel Dumke. A member representing Zions Bank has not been named.
The Salt Lake County Economic Development Revolving Loan Fund:
Provides loans of up to $250,000, at interest rates ranging from 14 percent (for a four-year loan) to 16 percent (five years).
Is available to high-tech businesses that pledge to create at least one job for each $35,000 borrowed.
Is restricted to companies in unincorporated Salt Lake County, Alta, Bluffdale, Cottonwood Heights, Draper, Herriman, Holladay, Midvale, Murray, Riverton and South Salt Lake.