Stimulus loans bypass Cape Fear area defense contractors

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The nearly 2-year-old American Recovery and Reinvestment Act has pumped $585 million into the Cape Fear regional economy so far. But few defense contractors around Fort Bragg appear to have benefited directly from federal economic stimulus through big loans or loan guarantees.

The Fayetteville Observer reports small defense contractors, some founded by military veterans, have been touted as a generator of high-wage jobs in the 10-county region for years to come, as Fort Bragg expands through base realignment. Like all small businesses, however, the military suppliers have struggled to find capital to acquire equipment and inventory and hire workers, said Scott Dorney, executive director of the North Carolina Military Business Center.

Stimulus loans could help local defense contractors secure credit in a deep recession. But an analysis of stimulus award data from the federal government, provided to The Fayetteville Observer by the nonprofit news organization Pro Publica, shows big loans or guarantees largely bypassing the area’s fledgling defense industry.

Of the 14 nongovernmental entities that received a minimum of $1 million in loans or guarantees from stimulus funds, just one appears to fit the conventional definition of a defense contractor. K3 Enterprises Inc., a veteran-owned provider of communications and information technology, was awarded about $1 million in Small Business Administration long-term financing to acquire major fixed assets for expansion or modernization in 2009. The 6-year-old company bought a Cumberland Street property in 2008 as part of an expansion that K3 Enterprises expected would bring 25 to 50 high-paying jobs to Fayetteville.

Jim Arp, a vice president of K3 Enterprises, said he doesn’t know why other defense contractors haven’t gone after or succeeded in getting stimulus funds. But Arp said the Small Business Administration has programs to help startups get off the ground. Along with direct financial assistance to businesses, the state also sent stimulus money to local governments to support entrepreneurial activity in economically depressed areas, noted Cathy Akroyd, a spokeswoman for the North Carolina Office of Economic Recovery & Investment…

Some small businesses received stimulus funds indirectly as subcontractors at Fort Bragg construction sites, said Dorney, whose Fayetteville center has tracked local stimulus projects. “The bases got money,” Dorney said. “But it was a very small part of the stimulus money.” The Defense Department’s slice of the $787 billion stimulus package amounted to $7.4 billion, according to the Pentagon. “Most of the money did not go to federal agencies to use on federal projects,” Dorney said. “Most of it went to states to use on state projects funded with federal money.”

A Fayetteville example was the $52.5 million stimulus-funded state contract awarded to R.E. Goodson Construction Co. Inc. of South Carolina to grade and build bridges for a planned segment of Interstate 295 connecting Bragg Boulevard and Murchison Road.

Defense-related small enterprises, especially startups, could use a federal boost in trying to line up working capital, Dorney said. He noted about 20 lenders and four of the area’s most credit-worthy defense contractors got together last spring at Fayetteville Technical Community College. “Access to capital is a real issue,” Dorney said of the new military contractors. Dorney said Gov. Bev Perdue has enlisted the state’s small business and banking commissioners to prod lenders to approve more loan applications from small defence contractors with reliable cash flows. Read More.

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