City’s loan fund to help small businesses - July 16, 2010
By Rick Wright
Staff Writer
South Portland is open for business. That was the message the city council sent at a meeting last Wednesday.
The council passed an order that established a revolving loan fund to develop new businesses and assist expansion and retention of existing businesses.
“This is a major expansion of municipal services. We need the flexibility to help out our big and small businesses,” said councilor Tom Blake. “This gives us the meat to do this more gracefully and more legally.”
The program is designed to provide financing for businesses located in or moving to South Portland. It encourages businesses to create new employment for city residents.
“As job creation in general is a key element, wherever possible, companies receiving (revolving loan funds) shall give preference in hiring to South Portland residents,” Assistant City Manager Erik Carson said in a position paper prepared for the council.
Several cities around South Portland have had similar programs in place for some time.
“Portland has been doing this for decades,” said Mayor Tom Coward. Carson has noted in previous council workshops that Westbrook also has a revolving loan fund for businesses.
Councilors at a previous workshop expressed several concerns about the proposal, including limiting municipal liability, confirming collateral and clarifying the application review process.
Prospective borrowers must submit an application form provided by the city. Applications will be judged based on criteria, including personal financial statements, cash flow performances and business plans.
All applications will be evaluated by a review committee comprised of the city’s economic development director, finance director and a community representative.
Individual loans will be made for no less than $2,500 and no more than $10,000.
No loan from the city’s revolving loan program, in conjunction with another lending source, may exceed $100,000, according to the fund’s management plan.
The committee will forward a recommendation to the city manager and city council for review and the council will give final approval.
City officials plan to give 60 percent of the funds to new businesses and 40 percent to existing businesses.
The fund will be capitalized by $300,000 of Tax Increment Financing District money. Municipalities use TIF districts to capture taxes levied on new or renovated commercial or industrial real estate and personal property.
The money will come from two existing TIF districts located at Long Creek and Cummings Road.
Interest will be no less than 2 percent and will be tied to the discount rate listed in the Wall Street Journal. The interest rates will be fixed and loans will be made for five- to 10-year terms with no prepayment penalties.
“This is an excellent opportunity for someone to start a business. I strongly support it. I look forward to the community tapping into the resource we are providing to them,” Blake said.
Rick Wright can be reached at 282-4337, ext. 237 or news@inthesentry.com.
Staff Writer
South Portland is open for business. That was the message the city council sent at a meeting last Wednesday.
The council passed an order that established a revolving loan fund to develop new businesses and assist expansion and retention of existing businesses.
“This is a major expansion of municipal services. We need the flexibility to help out our big and small businesses,” said councilor Tom Blake. “This gives us the meat to do this more gracefully and more legally.”
The program is designed to provide financing for businesses located in or moving to South Portland. It encourages businesses to create new employment for city residents.
“As job creation in general is a key element, wherever possible, companies receiving (revolving loan funds) shall give preference in hiring to South Portland residents,” Assistant City Manager Erik Carson said in a position paper prepared for the council.
Several cities around South Portland have had similar programs in place for some time.
“Portland has been doing this for decades,” said Mayor Tom Coward. Carson has noted in previous council workshops that Westbrook also has a revolving loan fund for businesses.
Councilors at a previous workshop expressed several concerns about the proposal, including limiting municipal liability, confirming collateral and clarifying the application review process.
Prospective borrowers must submit an application form provided by the city. Applications will be judged based on criteria, including personal financial statements, cash flow performances and business plans.
All applications will be evaluated by a review committee comprised of the city’s economic development director, finance director and a community representative.
Individual loans will be made for no less than $2,500 and no more than $10,000.
No loan from the city’s revolving loan program, in conjunction with another lending source, may exceed $100,000, according to the fund’s management plan.
The committee will forward a recommendation to the city manager and city council for review and the council will give final approval.
City officials plan to give 60 percent of the funds to new businesses and 40 percent to existing businesses.
The fund will be capitalized by $300,000 of Tax Increment Financing District money. Municipalities use TIF districts to capture taxes levied on new or renovated commercial or industrial real estate and personal property.
The money will come from two existing TIF districts located at Long Creek and Cummings Road.
Interest will be no less than 2 percent and will be tied to the discount rate listed in the Wall Street Journal. The interest rates will be fixed and loans will be made for five- to 10-year terms with no prepayment penalties.
“This is an excellent opportunity for someone to start a business. I strongly support it. I look forward to the community tapping into the resource we are providing to them,” Blake said.
Rick Wright can be reached at 282-4337, ext. 237 or news@inthesentry.com.
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