Council approves changes to loan programs

Springfield City Council last night unanimously approved changes to two city loan programs in an attempt to make them more attractive to borrowers.

One measure changes the name of the Small Business Development Loan Program to the Commercial Loan Program and expands its citywide footprint. The other adjusts downward interest rates from the Brownfields Program Revolving Loan Fund.

Commercial Loan Program
Capitalized by the federal Community Development Block Program to remove blight and further U.S. Housing and Urban Development projects, the Small Business Development Loan Program has issued 225 loans exceeding $30 million since 1984.

Springfield Planning Director Mary Lilly Smith said during the July 27 public hearing $3.5 million in lending income is still available in the center city-focused program.

The bill expands the service area to encompass the entire city from the downtown, College Street redevelopment area and Boonville corridor to the Commercial Street and Walnut Street historic districts. Smith also has said a name change would better define the program because some projects have no connection to small businesses.

Terms of the program have been adjusted, as well.

The interest rate is now tied to the prime rate used by banks. Previously, the city couldn’t offer rates below 5 percent, which was prohibitive, according to Smith, because borrowers could often secure better terms through banks.

Now, the program offers a rate half of prime, plus 1 percent. With prime at 3.25 percent this week, according to Bankrate.com, the city’s Commercial Loan Program could offer a 2.63 percent interest loan, or 2.13 percent interest on a loan for a developer who pays the prevailing wage.

Brownfields Program Revolving Loan Fund
The brownfields fund, which was established in 2009 via a $1 million Environmental Protection Agency grant to support cleanup loans for businesses, has netted two loans and five subgrants to date.

The program, which was recapitalized, has about $1 million available to loan. According to information in the bill, 13 qualified borrowers decided not to use the program after going through the application process and learning about policies and requirements involved.

With last night’s passage, the brownfields fund now can offer no-interest terms for up to five years instead of two; 2 percent interest between years five and 10 instead of 3 percent; and 3 percent interest from 10 to 15 years instead of 6 percent.  

“I’m excited to see these changes. My family has been in small business since the 1950s, and I think anything we can do to help them – new businesses – to establish their operations is great,” City Councilman Justin Burnett said ahead of votes for both bills.