The goal to not borrow too much money was always crystal clear. But the much-needed cash was a blessing for this small-business owner to see his company continue to flourish.
John Katahira is a principal in The Limtiaco Consulting Group, a civil engineering and environmental firm. The company started 20 years with three employees and then multiplied to six, a dozen, 18 and now 30-full-time workers.
John recalled that every time Limtiaco’s lease ended every five years, the company needed a bigger space and had moved twice from its Piikoi location in Honolulu to Dole Cannery in Iwilei before deciding that it was eventually time to buy their own space.
“But you don’t have that much cash as a small business,” he said. “A traditional commercial loan is unlike a traditional residential loan where you need at least 25 percent cash. As much as we wanted to buy our property, we couldn’t make the numbers work.”
Three years ago, Hawaii State FCU helped with a loan for their new (current location in Kalihi) building, taking on the bulk of the financing. Using HEDCO’s (Hawaii Economic Development Corporation) SBA 504 Loan Program, John only had to contribute 10 percent of the cost, HEDCO financed 40 percent and Hawaii State FCU took on 50 percent of the total financing.
After making aggressive additional payments to principle, John said he took a hard look at the numbers and decided to refinance the loan, getting rid of the HEDCO financing and fees and moving everything over to Hawaii State FCU. “That cut off eight to 10 years of our mortgage,” John said. “That was a tremendous opportunity for us.”
As a side benefit from being a corporate account member, the company took it a step further to help their employees get basic Mortgage 101 sessions from Hawaii State FCU with a focus on refinancing and first-time homeownership. Lenders were made available to answer questions and help employees go through the application process if they were ready. John said about a half dozen workers took advantage of the opportunity, which couldn’t have been better timing as mortgage rates have since jumped up.
John’s financial savvy with his business also aligns with his personal views on loans. “Basically, we don’t like loans too much,” he said. “That’s just our philosophy… we try not to borrow too much.”
He and his wife Lori paid off their car loan in a year, followed by a condo mortgage and two investment properties that were at the tail end of a 15-year mortgage.
John said the rates were so attractive it made sense to do a HELOC, which they only relied on for a year and a half. “Interest rates at that time were 1.99 percent,” he said, adding that they had such low balances that they paid them off so now they are “free and clear.”
Today John is focused on growing the business financially, hoping to lay the groundwork for the next generation. And he attributes the financing of that building, once an old warehouse to manufacture rubber slippers, as the step in the right direction for the company’s succession planning.