smallbiz/19″/mike1st/mark2nd By BRUCE DOBB Randy Allen’s dry cleaning business had been in Canoga Park for 15 years and had built a strong clientele of regulars over the years. When the Environmental Protection Agency reclassified the PERC fluid his dry cleaning machine used from a “hazardous” substance to a “toxic,” he wasn’t sure how that affected him. He only found out when he went to renew his permit with the South Coast Air Quality Management District. The AQMD is the air pollution control agency for the four-county region including Los Angeles, Orange and parts of San Bernardino and Riverside. This area represents about half the population of the state of California. In the past decade, the AQMD reduced the number of Stage I smog alerts by 70 percent. This is despite a huge increase in the number of cars and people. (AQMD only regulates stationary sources of pollution.) Allen’s old machine no longer qualified for a permit. That was the bad news. The good news was the special financing he was offered so he could affordably buy a new machine with the “best available technology” that would save him enough money in operating costs to pay the debt service on the loan for five years. It increased his efficiency. He could now handle up to six loads per day; before, his daily capacity was less than half that. His productivity increase meant more sales at lower costs, and that benefit would be there after the machine was paid for. This was made possible through a little-known guarantee program sponsored by the AQMD, called the Air Quality Assistance Fund. The AQAF is one of the region’s best-kept secrets. Of the 30,000-plus businesses that operate with AQMD permits in Southern California, few know about this program. While other loan guarantee efforts, such as that of the Small Business Administration or the U.S. Commerce Department, boast an average of one job per every $20,000 of government sponsorship, the AQAF has saved or created one job for every $2,700 of AQMD exposure. The AQMD has done this while carrying out the dual mission of not just promoting local employment, but also helping to control emissions from stationary sources of air pollution. The costs of this highly effective program are not substantial. The loss rate has been under 1 percent in the three years of operations, and the delinquency rate is under 4 percent. That’s respectable by any banking standard for a program intended by statute to assist businesses unable to obtain credit elsewhere. The success story of the AQAF loan guarantee program is best measured not by just the numbers but by actual case stories of those participants who have benefited. For example: Paradise Textile. Started three years ago as a textile-dying plant in Pomona, this company treats some 35 percent of all fibrous cloth used in the apparel industry in Southern California. While receiving more than $1 million in financing for major equipment purchases, the company was unable to finance a unique drying filtration system which was required to control particular emissions. The special character of this equipment limited its resale value. The credit enhancement provided by the AQAF was sufficient to solve the problem. The company has added 15 new jobs to its existing 140 job base from the time of its loan origination one year ago. Milt and Michael’s Dry Cleaners. Employing over 67 low-to moderate-skilled workers in the Toluca Lake section of the city of Los Angeles, Milt and Michael’s is one the nation’s most successful dry cleaning operations. The firm services 43,000 active clients a month through a highly automated card I.D. system that reduces customers’ pick-up wait. The company’s use of the AQAF enabled it to triple capacity by buying a dry cleaning machine that could handle 10 loads per shift, as opposed to three, and did not require the removal of PERC-saturated clothing from one machine to another during processing. By lowering PERC usage from 55 gallons a month to five gallons, they also experienced dramatic savings in haul-away costs. The AQAF guarantee program can be used by any company that needs to obtain a permit from the AQMD to operate a machine. Industries as diverse as bakeries, manufacturers of soap and furniture, and photographic studios are impacted. The AQMD rules affect over 19 major Standard Industrial Codes groups, such as “printing and publishers” and “automotive Repair.” The AQMD reaches out in other ways to small companies through its Small Business Assistance Office (800) 388-2121 by offering engineering and technical assistance, loan information, permit counseling, and input into formulating the rules that impact their industries. Bruce Dobb is the chief credit officer for the Valley Economic Development Center’s revolving loan fund and a regular contributor to the San Fernando Valley Business Journal.