Innovative financing helps theater owners meet digital needs
Faced with a need for substantial financing to purchase new digital projection equipment or likely close the doors, two iconic hometown movie theaters took very different paths to the needed money: The Catlow Theater in Barrington, opened in 1927, found its financing through crowdfunding at www.kickstarter.com; the Sycamore State Theater, opened in 1925 in Sycamore, refinanced its existing mortgage with an SBA 504 loan at National Bank & Trust, Sycamore.
Both approaches can work for other small businesses, too.
Movie studios have pushed theaters to digital projection by essentially abandoning 35 mm film for digital's lower distribution costs. Facing prices between $75,000 and $100,000 for the required new projection equipment, independent theater operators have been forced to raise big dollars or close.
“We owned our building,” says Daryl Hopper, whose family bought the Sycamore State Theater in 2000. “We had a mortgage, but we'd gotten pretty close to paying it off.” With five apartments, a barber shop and a restaurant also in the building and producing income, the Hoppers considered closing the theater portion.
But movie theaters “are what I like to do,” Hopper says. “I started in high school and put myself through college” with theater jobs. Besides, with three children and a daughter-in-law in the business, and three grandchildren coming on, closing the movie house was a definite last option.
The Hoppers turned to their bank, National Bank & Trust, where Vice President Nick Lee worked with them and Wessex 504 Corp., a certified SBA 504 lender headquartered in Chicago, to refinance their mortgage. Basically, the 504 loan program allows qualifying small businesses to finance fixed assets with long-term funds at below market, fixed rates.
In addition to funding the digital projection equipment, the mortgage refinance allowed the Hoppers to tuck point the building, upgrade the bathrooms and electrical, and put in new seats.
In Barrington, Tim O'Connor and business partner-fiancee Roberta Rapata, who in 1981 bought the sandwich shop that operates from a storefront in the Catlow and then bought the theater in 1988, raised the financing question with a banker.
“But when Roberta suggested we might be looking for a loan, he asked what we'd use for collateral,” O'Connor recalls.
So much for the bank option. “Then a friend told me about the Patio Theater (a Chicago theater which raised its digital projection funds through Kickstarter) and people started emailing me,” O'Connor says.
“Kickstarter was the answer to our prayers. I took the school (on the Kickstarter site), an a-v teacher and two students from Barrington High School helped with a video, and I guess we had made a lot of friends over the years.”
Like other crowdfunding sites, Kickstarter allows individuals to contribute to qualifying projects. Ultimately, nearly 1,400 backers contributed slightly more than $175,000 to The Catlow. The additional funds have been used for a new heating system, a new screen, new sound and, even, a new popcorn machine.
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