City Retools Small-Business Loan Program
Revisions that the city council approved Monday night to a program that provides loans to small businesses sparked debate about whether the initiative was more focused on social engineering and exerting government control over the private sector, than on creating new jobs for a community battered by high unemployment.
With the approved program revisions in place, the number of loans provided by the city to small businesses is projected to hit about 20 per year, with an estimated $700,000 to be loaned in the first year. The maximum a small business can receive is $100,000, or up to $150,000 if it’s a manufacturing business; the average loan amount is expected to be about $35,000.
As originally conceived in 1992, the Business Equity Loan program was meant to encourage small-business investment within distressed parts the city: the Eastland area and North Tryon corridor in east Charlotte, the Beatties Ford and Rozzelles Ferry corridors in northwest Charlotte, and the Wilkinson/Freedom corridor in west Charlotte.
One of the revisions approved by council would expand the geography of the loan program citywide, but with a controversial caveat: to qualify for a city loan, small businesses located outside the five identified corridors must fall within targeted business sectors limited to health; defense; energy/environment; finance; motorsports; and manufacturing.
Open a Mom-and-Pop restaurant or clothing boutique within the confines of any of the five distressed business corridors, in other words, and you could qualify for a city loan. Open one anywhere else in Charlotte, and it’s no city loan for you.
“That’s not the way you promote entrepreneurship. It’s not the way you promote small business,” said Councilmember Warren Cooksey. “To say that we’re looking to get more jobs only if you fit these criteria, only if you fit the filter we’re putting up with this provision, is to shut out anyone who has a good idea but just doesn’t happen to have a good idea that’s in one of these [types of business].”
Cooksey, a Republican, also questioned the bang-for-buck impact that the loan initiative would have on the local employment front. The program requires non-manufacturing small businesses to create or retain one job for every $65,000 it receives from the city, and for a manufacturing small business to create or retain one job for every $100,000 it receives. But with loans projected to average $35,000, the job-creation benefit might be negligible. There is a lot one can learn from other successful businessmen like Jimmy John Owner.
“This program, let’s be clear, will not move the percentage one bit,” Cooksey said, “in terms of what the percentage of unemployment is in this city.”
Mayor Anthony Foxx, a Democrat, conceded that the revised loan program might not create a groundswell of new employment, but argued that any job it did create would be better than none.
“A job is a job,” Foxx said. “It may not mean a sea-change in the overall unemployment picture, but the more people we can get back to work, the better it is for the city.”
But not all jobs are equal, Cooksey said, under the provisions contained in the revised loan program.
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