Delaware City Council approves creation of business loan fund
Delaware's small businesses might be able in coming weeks to file loan applications under a new program authorized June 8 by Delaware City Council.
Council passed an ordinance directing City Manager Tom Homan to establish a revolving loan fund and authorizing appropriations.
The ordinance notes the COVID-19 coronavirus pandemic "has resulted in one of the worst economic downturns in American history and ... the pandemic and stay-at-home orders have resulted in a number of Delaware businesses having to close, having to significantly curtail operations and having to layoff or furlough employees. ... The city of Delaware is committed to doing everything it can to assist its businesses in the arduous task of reopening, including getting access to working capital."
The ordinance also authorizes the city manager to enter into an agreement with Ohio's Economic and Community Development Institute, under terms similar to those contained in an ECDI proposal and draft agreement.
ECDI is a Columbus-based 501(c)(3) nonprofit economic-development organization.
CEO and founder Inna Kinney told the council June 1 the organization has developed loans of more than $60 million that helped create more than 10,000 jobs since it was founded in 2004.
The institute's mission, she said, is to invest in people and communities for social and economic change by providing capital and educational resources to businesses.
She described a scenario in which money provided by the city for loans would be "leveraged" with additional funds from the U.S. Small Business Administration, the U.S. Department of Health and Human Services and other agencies, foundations and groups.
As a result, the amount available for loans in the city will be significantly higher than the city's contribution to the program, she said.
Sean Hughes, city economic development director, told council June 8 that because ECDI will use other funding sources in addition to city money, "this is a long-term program that allows us to continue to provide low-interest loans to businesses that we already have who are trying to get past this difficult time period, or grow into the future or even startups as we're trying to find capital for those as we move forward as a city."
He said ECDI proposes the city contribute $350,000 for loans and $50,000 for administration.
Hughes said his department surveyed local businesses, receiving 22 responses of which 16 definitely were interested in a loan with an interest rate of no more than 3%.
Attached to the meeting agenda was the draft agreement with ECDI, saying loans disbursed from the city revolving loan fund would carry an interest rate of no more than 3% and loans "leveraged with additional sources of capital" won't exceed 5% interest.
Loans can be as small as $2,500, and most businesses responding to the survey were interested in loans ranging from $10,000 to $25,000, Hughes said.
"We believe it will be at least two to three weeks before we hit the streets with loan applications," he said after the meeting.
Homan on both June 1 and June 8 emphasized money for the loan program will not come from the city's general fund, which covers daily operations.
Instead, he said, the money will come from the reserve fund.
The fund initially was established in connection with capital improvement projects, but was not needed, he said June 8.
"So this money -- this fund which is close to $1 million -- is available for economic development. And I think, as we've said earlier on, if there was ever a set of circumstances that would warrant this type of program, it's where we are right now," Homan said.
Council's consideration of a city loan program began May 11, when it discussed a proposed loan program approved May 14 by the Delaware County commissioners.
The county asked municipalities, including the city, to contribute money to the effort.
County economic-development director Bob Lamb on May 13 told the council's finance committee the county's loan funds may be used to cover up to four months of rent, mortgage and/or utilities payments. The loan terms would extend five years at an interest rate no higher than 4% and an initial rate of 3%.
Council discussed if it would be a better plan for the city to create its own program, so any city funds used in the effort would benefit city businesses.
The city approached ECDI at the suggestion of Hughes, who said he had experience with the organization when he worked in Madison County.
Also June 8, council passed a resolution approving a grant program, with $100,000 available, to assist businesses affected by the pandemic and a May 19 flood that affected a number of areas along Delaware Run.
Assistant city manager Kyle Kridler earlier said the city could start taking applications June 1, pending council's later approval of the program.
Kridler told the council June 8 the city had received 18 applications from small businesses, including restaurants, breweries and retail and fitness businesses.
The grants are capped at $2,500, or up to $5,000 in special circumstances, the legislation says.
The ordinance also says the deadline for submission of applications is 5 p.m. Thursday, June 18. Mayor Carolyn Kay Riggle and council member Kent Shafer suggested extending the deadline.
Like the small-business loan program, the grant program is funded by the city's reserve fund, city finance director Justin Nahvi said.