City Retools Small-Business Loan Program
“We are creating a program where a person can, through a bank, come to the city and say, ‘but for a city loan I’m not going to be able to create a job’, and we’re going to say, ‘sorry your job is not a good job. We don’t want the job you’re going to create because it doesn’t fit one of these criteria or it’s not in a location we want it,’” Cooksey said.
“This program as currently presented is not saying a job is a job and we’re going to help with any job,” he said. “It’s not about job creation; it’s about control.”
Foxx countered that the revised loan program provided benefit to small businesses across the city, while still encouraging investment within the distressed business corridors. If a company wants to locate in one of those areas, Foxx said, there aren’t any restrictions; it can be any kind of business.
“It would be overstating the case to say a business couldn’t get a loan from the city if it was in some other sector,” Foxx said. “If it chooses to move into one of our targeted corridors, they can.”
Tom Flynn, the city’s director of economic development, said the targeted sectors provision is a way to encourage certain types of business from locating in areas that might not need them the most.
“The committee did discuss whether or not it was the right thing to be doing, with a limited amount of money, to be looking at loans for retailers and restaurants in parts of our community that aren’t distressed,” Flynn said.
The loan program has already provided benefit on that front, said Gail Whitcomb with the city’s neighborhood and business services division.
“It’s changing the environment of those corridors,” she said, “by providing services to the surrounding neighborhoods that otherwise probably wouldn’t be available.”
Councilmembers Edwin Peacock and Andy Dulin also wanted the “targeted sectors” stipulation stripped from the loan program overhaul. But when the council’s Democrat majority thwarted that effort, both of the Republicans joined in voting to approve the program revisions. Cooksey cast the lone dissenting vote.
Even without the targeted sectors provision, Cooksey said, other revisions to the program provided incentive for small businesses to locate within the city’s distressed corridors. Businesses inside those corridors can qualify for loans up to 40 percent of the total project cost, while loans to businesses outside the corridors are capped at 25 percent.
Another revision to the program increases the allowable personal net worth of business owners eligible for a city loan from $300,000 or less to $750,000 or less.
The city loans are typically made for a 10-year term and provide deferred repayment for a period of one to three years. Since its inception the program has made 163 loans totaling $5.8 million, in participation with regular bank financing to the tune of $36 million. Of those loans, 30 have been defaulted, 94 paid off, and 39 remain active in the city’s portfolio.
The program was averaging about 10 loans a year until 2000 when the numbers began slumping significantly, eventually dropping to only two in 2004 and exactly none last year. Officials attribute the decline to the launch in 2003 of the city’s Small Business Enterprise program, which supplanted its minority- and women-owned business program and rolled out loans for targeted start-up companies. Since 2003, the SBE has made 86 loans worth about $4.3 million, with 14 defaulting, 26 paid off, and 46 still active in the city’s current portfolio.
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