Johnstone Supply Eastern Michigan and Northern Ohio Group is an HVACR company that sells anything relating to commercial furnace, air conditioning and refrigeration.
The Johnstone Supply Inc. cooperative has been around for more than 50 years, launching a location in Detroit 22 years ago. Johnstone now has 13 stores throughout metro Detroit, including three in Oakland County (Troy, Orion Township and Farmington Hills).
By the time Johnstone opened its fourth store, it was buying instead of renting its buildings. A bank they were working with told them about Small Business Administration (SBA) Small Business loans.
“These were 80 percent-plus loans and the SBA portion of it is a 20-year loan fully amortized, which makes it much easier to buy properties at a fixed rate for those 20 years,” says Jeffrey Sheehan, Johnstone Supply president.
Simply put, it’s a really good deal for small businesses.
“With the federal SBA 504 loan program, we partner with banks or credit unions to help companies purchase fixed assets — an existing building, new construction or a significant piece of equipment,” says Cathy Rasegan, supervisor of financial services at Oakland County Business Finance Corp.
As one of only three Certified Development Companies (CDC) in Michigan, the Oakland County Business Finance Corp. can assist companies throughout the state (including the Upper Peninsula), along with rural areas outside of Michigan. Only a CDC can offer the SBA 504 loan.
“When they buy, they can also finance renovations if they need to, and now they can even refinance,” Rasegan says, explaining that small businesses can get the loan with 10 percent down in most cases, where a traditional bank loan requires 20 percent. Then the rate of the SBA portion of the loan is fixed for the life of the loan, which can be for 10, 20 or 25 years.
The SBA loan is executed in partnership with a bank loan. The structure is typically 50-40-10: 50 percent traditional bank loan, 40 percent SBA loan and 10 percent down payment.
This loan structure allowed Johnstone Supply to conserve its cash for down payments and buy bigger buildings the company could grow into as opposed to being limited to just what it could afford at the time.
“That made the business grow to $100 million over the last 20 years,” Sheehan says. “That’s been a significant portion of why our growth has been so good. We’ve been able to add more stores and more employees, focus on more growth and get more attention from vendors, and we don’t have to worry about the loans being due. We wouldn’t have been able to do this otherwise.”
And the company continues to grow. With a roster of about 130 employees, Johnstone plans on buying another building soon and one or two more before the end of the year.
Sheehan credits the folks at the Oakland County Business Finance Corp. for making the process seamless and easy. He also says the loans are “extraordinarily reasonable” to get for those who are credit-worthy.
“The deal with Oakland County has been incredibly great,” he says. “They have a great department that is very business-oriented.”
In fact, Sheehan has enjoyed the relationship with Oakland County so much that he works with that team almost exclusively — even when the buildings aren’t in the county. Of the company’s 13 locations, 11 were purchased with loans through Oakland County, including several refinances. The only other loan Johnstone holds outside of Michigan is through a bank in Ohio.
Sheehan laughed as he recalled getting an award from Oakland County Executive L. Brooks Patterson in 2016 for the number of loans the company has received through the SBA program. Patterson even made a joking face when he realized two of the properties weren’t in Oakland County.
“Now even when we go to a different area, we still use them,” Sheehan says. “We have a relationship with Oakland County, so we just go back to where we want to go instead of where we’re ‘supposed’ to go.
“As a business owner, it’s hard for me to explain how great of a program it really is. They have all of the paperwork from the last transaction. They’re proactive in getting things approved with the SBA. They’re very transparent. They under promise and overperform. Anybody I talk to who deals with them tells me the exact same story.”
Rasegan is flattered to hear such feedback.
“As with any federal program, some clients have concerns it will be complicated. Oakland County is their partner and works towards making this a smooth process,” she says. “We’re as hands-on as we can be. We want you to run your business while we do our piece. When a repeat customer comes back, that speaks volumes for the program and more importantly, our partnerships.”