Patrons throng Penny Ice Creamery’s counter on an unseasonably warm January afternoon. Kendra Baker and Zachary Davis, the shop’s owners, are back operating their business after attending the State of the Union Address. Photo by Prescott Watson.

Updated 2/15/2011 at 8:40pm

First Lady Michelle Obama invited Kendra Baker and Zachary Davis, owners of the Penny Ice Creamery, to attend President Barack Obama’s delivery of the State of the Union address.

Baker and Davis initiated contact with the White House in October by posting a video on YouTube. The video thanked the Obama administration, Sens. Barbara Boxer and Dianne Feinstein (D-Calif.), and Rep. Sam Farr (D-Santa Cruz) for their roles in the passage of the American Recovery and Reinvestment Act.

The business partners were originally covered under a 90 percent loan guarantee provision when they filed for a 7(a) loan from Lighthouse Bank. However, the provision expired in June 2010 and reverted back to 75 percent. This caused total approved loans from the 7(a) program to fall to $647 million for June from $1.9 billion in May.

When the provision expired, Lighthouse Bank said they would have to put everything on hold and wait for Congress’s vote to renew the loan prevision. Without the loan, Davis said, the business plan may have been put on hold.

“For about three days everything was up in the air,” he said. “Had it not been renewed … we would have had to find out if we could open without [a loan]. It definitely would not have happened on the timetable it did.”

The 90 percent loan guarantee was extended to the end of 2010 under the American Recovery and Reinvestment Act. Baker and Davis opened shop in August, and Davis said timing was key to their business plan.

“Opening when we did was really critical to our success because we were able to catch the end of the summer and make people aware that we are here,” Davis said.

Vice President Joe Biden personally called Baker and Davis in November to express his support of their new business and respond to their YouTube video.

“Joe Biden is a big fan of ice cream,” Davis said. “He threatened to come eat all of ours. He often holds public events at ice cream shops.”

Baker and Davis arrived in Washington, D.C. at 4 p.m. the day of the speech. They attended a reception at the White House for those whom Michelle Obama personally invited. Davis said it was an experience to remember.

“It was a really nice cross-section of the United States,” Davis said. “There were young people, small business owners like ourselves, service people, and some CEOs from bigger companies. It’s very rare that you would find all those different types of people in one room with the opportunity to talk and share experiences.”

The president’s address focused on restructuring American institutions to meet the needs of a changing global economy.

“We can’t win the future with a government of the past,” President Obama said. “The true engine of job creation in this country will always be America’s businesses. But government can create the conditions necessary for businesses to expand and hire more workers.”

City council member David Terrazas said Baker and Davis have achieved the kind of success that the president hoped would come from the Reinvestment Act.

“The Penny exemplifies what President Obama was talking about in his speech,” he said. “They made an investment that changed the look of the whole block. It’s an amazing story.”

While many, like Davis, embrace Obama’s vision of the economic future, some representatives are critical of his policies. C-SPAN aired House Budget Committee Chairman Paul Ryan’s (R-Wis.) response to the President’s new and extended policies.

“Whether sold as ‘stimulus’ or repackaged as ‘investment,’” Ryan said, “[The Obama administration’s] actions show they want a federal government that controls too much, taxes too much, and spends too much in order to do too much.”

Some welcome the new policies, noting economic or community benefits. Davis appreciates the president’s policies and rhetoric regarding business in the United States.

“I really appreciated the time he spent talking about the importance of small business,” he said. “The tax incentives that they’re putting in place enable us to survive when the economy is hitting a rough patch.”

Terrazas said 7(a) business loans must be granted responsibly. While there should always be scrutiny in circumstances where the government backs economic development, he said, extending the loan to businesses like the Penny Ice Creamery makes him feel confident in the policy.

Although the Penny Ice Creamery was not one of the businesses featured in the speech, Davis said being among those Michelle Obama invited was gratifying.

Baker and Davis work well over 40 hours a week to keep their business running strong. Davis didn’t waste any time getting back to work after returning to Santa Cruz.

“I was back in the shop scooping less than 12 hours after the speech,” he said.

Davis said the 7(a) loan program was essential for his business plan to take off. He said the speech’s focus on the policies that have been implemented are keeping small businesses alive.

“Small businesses don’t have deep pockets,” Davis said. “The owners and employees are all working together so when the economy struggles, everyone gets immediately affected. It was great to hear him give a shout-out to small businesses.”