SBA Lends ‘Defense-Focused’ Firms a Hand : Aerospace: A new loan program is allowing small companies to stay afloat and diversify in a shrinking industry.
State-of-the-art computers control the precise shaping of aircraft parts at El-Co Machine Products Inc., but the tiny, 16-employee company still largely tracks orders and production by hand.
Without a $25,000 automated tracking system and other improvements, the Inglewood company says, it would soon be left behind, and perhaps left out of, Southern California’s shrinking aerospace industry.
A new effort by the Small Business Administration and the Defense Department will help El-Co and other “defense-focused” companies diversify into commercial markets while preserving their defense expertise.
Loans to El-Co and two Orange County firms are among the first through the Defense Loan and Technical Assistance program, or Delta. Over the next two years, the SBA will award about $1 billion of such loans, guaranteed by $30 million of defense funds.
“Not a day goes by in Southern California that you don’t read and witness . . . what’s happening with defense-related firms,” said SBA Administrator Philip Lader at a ceremony Thursday, presenting a symbolic, oversized $150,000 check to El-Co President Andy Rasmussen.
Rasmussen said that like many machine-shop owners, he would not have been able to get a loan on his own. And without financing, El-Co could not afford capital investments, including the automated tracking system Northrop Grumman Corp. now requires of its contractors.
“They would have just eliminated us as a vendor,” Rasmussen said, costing the company more than a quarter of its $2 million annual sales. “It’d have been a real struggle for us to remain in business.”
El-Co’s current products include cargo door latches for Boeing’s 777 jetliner and pieces of Northrop Grumman’s F/A-18 fighter.
Nationwide, the loan program will preserve or create 35,000 defense-related jobs, Lader said. Since 1986, the aerospace industry in Southern California, largely driven by once-plentiful defense contracts, has lost about 116,000 jobs, down to the current level of 167,000, said Tom Lieser, associate director of the UCLA Business Forecasting Project.
Aerospace and Defense Technologies Inc. of Anaheim used its $250,000 Delta loan to move into a new, larger building. The previous site of the aerospace parts producer was “dark and dingy,” according to company President Scott Ferrante. “We were crammed,” he said. “There was no opportunity for growth.”
If plans to expand into automobile and mountain bicycle parts succeed, ADTI’s $1-million annual sales could grow by half, Ferrante said.
J-Tech, a Santa Ana company that makes electrical connectors, received a $245,000 loan. The money is integral to plans to increase J-Tech’s commercial sales, currently just 15% of the $5 million-a-year business, said John Pollock, one of the company’s partners.
Within three years, J-Tech hopes for an even balance between defense and commercial, Pollock said. That would help the company weather downturns in one of the sectors. “It’s grow or die,” he said.
