Story and photos by Yanting (Joyce) Cai

Olive, mango and chipotle are not your typical cream-cheese flavors. But they are among the 30 varieties that customers of Bagel Express III, many of them Baruch students, can choose among. In the mornings, the line at the store, on East 25th Street and Third Avenue, often extends to the rear of the shop.

Bagel Express III opened in 2009, the third bagel store owned by HuNan Ho, a South Korean native who graduated from college in the Boston area and has been making a living in the food industry for more than 30 years. Bagel Express I opened on the Upper East Side four years ago and Bagel Express II a year later in Midtown.

Surprisingly, it was the financial crisis and ensuing recession that created the ideal circumstances for Ho to open Bagel Express III. Unusually low rent offered by the landloard and low financing costs made possible by the Obama administration’s 2009 economic stimulus package were two driving factors.

“Thanks to the Obama administration, which pushed for the S.B.A. loan,” says Ho, referring to the Small Business Administration, “I was able to get the financing. The upfront bank fee was 4 percent to 5 percent for small business loans, and it dropped to 0 percent when I financed this store.” He says he was able to finance his store with 50 percent equity and a 50 percent loan.

The S.B.A., part of the Commerce Department, provides support to small businesses by educating and preparing potential business owners to apply for loans.

The American Recovery and Reinvestment Act of 2009 (known informally as the federal stimulus law) provided an additional $730 million to the S.B.A. Much of this went to financing programs, and loans were guaranteed up to 90 percent of loans, with no fees attached. S.B.A. loans also allowed longer repayment terms and higher borrowing limits and criteria to qualify for a loan are generally more flexible than for conventional loans.

Ho applied for the loan through a local Korean bank. “Korean banks know more about the Korean community and culture,” explains Ho. “This made me feel more comfortable to do business with them. It was also easy for me to put down less collateral since I used the same bank for my first two stores.” Ho submitted a concise business plan including projections for rent, construction, operating costs and projected future cash flows, as well as profits. Ho quickly obtained the loan.

If the financing was easy, business proved tough. “The worst time period I have ever experienced in my 30 years” in the food industry, says Ho of 2008 to 2011. “My business has not completely recovered from the financial crisis.” During the recession, his Upper East Side shop was hurt the most, as many customers, young professionals, lost their jobs and moved away. Ho’s take-out orders became smaller, average $7, well below the $10 average before the crisis.

But Ho managed to hang on, even as many other businesses did not; the failure rate of S.B.A. loans hit double digits, with 11.9 percent going into default last year.

Hugo Almonte, the manager of Bagel Express III, has worked for various food chains since he was 15. He says the shop’s monthly gross receipts are roughly $100,000. With rent of of $15,000 monthly, the cost of goods sold totaling 20 percent, and payroll expense totaling 20 percent, Bagel Express III has a 15 percent gross profit margin, he says. The store does not rely heavily on external suppliers; all its bagels and cream cheese are made in-house, with a baker who comes in three-to-four times a week.

With commodity prices rising, Ho has started to raise some prices. But he is debating just how much. Recently, he explains, the price of salt, sugar, wheat and flour rose roughly 10 percent. “Starting from next week, our rolls and bread price will rise by 7 percent,” says Ho. “Due to the recent Japan crisis, the price of tuna went up by 10 percent, Last time we increased the price was two years ago when the price of wheat went up.”

Ho says he chose the 25th Street location because of its proximity both to Baruch College and an upscale residential neighborhood. The college students provide only 40 percent of the store’s revenue; many of them don’t spend much. Johnny Palacios, an employee, says: “Most students just get the bagel or coffee. Our main customers are the people who live here.”

Oscar Sanchez, a Baruch senior, says: “I love Bagel Express because of its convenience, efficiency and of course the reasonable price. Most importantly, they can always make my order exactly as I want it, like the right amount of toast and a light portion of mayonnaise. I can’t go without saying that their bagels and cream cheese are the best I’ve ever had.”

Similarly, Daniel Litwack, a Baruch graduate student, says Bagel Express is good value: “The prices here are relatively cheap and the quality of the bagels and cream cheese is what keeps me coming here. So, I’m getting the most out of my buck.”

As with any new business, Ho has had a few unwelcome surprises that have hurt his business. He says he was shocked to discover that the majority of students have a four-day schedule. “I didn’t realize that Baruch was mostly open from Monday through Thursday,” he says. “When I went to college, I had classes five days a week. Moreover, there are many public holidays and winter/summer breaks.”

Almonte points out, “This store is a seven-day business, because it is located in a residential area. Delicatessens in a commercial area are open only five days a week because its main customers are the people who work in the area.”

Jonathan Alvarez, a local resident and young professional, visits the store almost every day. “I usually come here in the mornings before going to work for a coffee,” he says. “But on the weekends, I get my brunch from here. You’ll see me and maybe a friend of mine, having a platter and just chitchatting for like an hour.”

Although a Dunkin’ Donuts is across the street, Almonte says it’s not a direct competitor, because “we provide very specialized cream cheese, and also have many other popular items like omelets, sausage, bacon and other platters.” Almonte says inexpensive hamburgers, sandwiches and salads also attract lunch and evening customers.