According to the pundits, manufacturing is dead in the United States. They say that U.S. manufacturers cannot compete with the low labor costs in China, Vietnam or Mexico. The conventional wisdom is that small manufacturers, in particular, are at a major competitive disadvantage, resulting in millions of lost manufacturing jobs and shuttered plants over the past few decades.
Fortunately, someone forgot to inform Kentucky’s manufacturers. According to the Kentucky Cabinet for Economic Development’s web-based Kentucky Economic Development Guide, “Manufacturing is a top industry and major employer in Kentucky, accounting for one out of every seven jobs, or about 14 percent of nonagricultural work. Kentucky manufacturers employ nearly 256,000 workers.”
The manufacturing sector in Kentucky has seen a significant decline in employment over the years, but the industry still represents major employment and revenue opportunities, including for small manufacturers. The latest statistics reveal that Kentucky manufacturing revenue shipments amount to more than $119.1 billion annually. Lexington/Fayette County alone has almost $3.1 billion in annual manufacturing revenue.
Virtually every type of product imaginable, from cars to computer printers to nutritious feed for animals, is manufactured in the Bluegrass region of Kentucky. Toyota’s Georgetown plant has more than 7,900 workers. Lexmark has 2,700 on its payroll. Alltech employs 300 at its Jessamine County facility, one of 32 locations around the world. These are all large manufacturers. But the real surprise is that most manufacturers in Kentucky and the United States are small businesses with small staffs, as detailed in a link on the Kentucky Cabinet for Economic Development’s website.
The question of “how small is small” often arises when discussing businesses. The U.S. Small Business Administration has published federal size guidelines for small businesses. Of the approximately 120 manufacturers located in Fayette County, 68 percent employ less than 50 people, and 81 percent have less than 100 employees — very small by manufacturing standards.
So how do small manufacturers compete on a global scale? Many use SBA programs designed to level the playing field, including loan guaranty programs, exporting initiatives, contract opportunities, free counseling programs and other small business services. Cassius Butts, SBA Region IV administrator, who is based in Atlanta, states, “Manufacturing is critical to the economic stability of the Southeast region. The SBA serves small manufacturers with support for billions of dollars in capital. Nearly 10 percent of SBA 7(a) and 504 loan programs support manufacturers, and we hope to see this number increase as manufact-urers bring more jobs to the Southeast
region.”
Community Ventures Corporation (CVC), based in Lexington, is a leading provider of SBA’s Micro-Loan Program, which offers small business loans up to $50,000 and technical assistance to small businesses. CVC is also a certified development company for the SBA 504 loan program, which offers low-interest, long-term, fixed-asset financing to small businesses. Small-business owners may be required to inject as little as 10 percent into the project. This is an ideal way for small manufacturers to expand a plant or build a new facility.
Kevin Smith, CVC’s president and CEO, said, “Partnering with business owners is what Community Ventures Corporation is all about. We learn as much from these innovative entrepreneurs as they learn from us. As these businesses grow and succeed, they are creating jobs. These small businesses lay it all on the line every day, and they are the answer to turning around this challenging economy.”
One small manufacturer that received an SBA 504 loan through Chase Bank and CVC is Rogers Windows, Inc., a 53-year-old company located in Lexington. They produce residential new construction and replacement windows, as well as patio doors, storm and specialty shape windows. This manufacturer has evolved rapidly since 1995, when Dean and Debbie Lowe bought the business. After the acquisition, they outgrew their location several times. Eight years ago, they used the 504 loan program to purchase land and renovate a building that would accommodate their expanding company long term.
Dean Lowe stated that the commercial loan officers at Chase and CVC helped Rogers Windows through the SBA loan process, and that loan enabled the company to survive during one of the most severe recessions in over 70 years.
“They were great, helping us save time, organize our loan paperwork and avoid mistakes,” Lowe said.
Lowe went on to state that the loan “helped us weather the storm” of the recession. “We now have the capacity and are in a great position to grow and service customers in our industry.”
> See also, Inside the Manufacturing Skills Gap. Business Lexington contributing writer Dan Dickson looks at the the 2011 Skills Gap Study, commissioned by the Manufacturing Institute.
> In this video produced for the assurance, tax and consulting firm McGladrey, Karen Kurek, National Manufacturing & Distribution Practice Leader, discusses the difficulty of finding skilled workers.
Michael Ashcraft works as a public information officer in the SBA Kentucky District Office.