Loan fund moves ahead
- Published: August 12, 2010
At their Aug. 2 meeting, members of Village Council discussed how best to move forward with the Village’s Economic Development Revolving Loan Fund, a fund designed to aid local economic development by enabling the Village to loan money to existing and start-up businesses.
“I think getting this loan fund under control and getting money for new businesses is one of our most effective tools” for economic development, said Council member Lori Askeland.
The fund began in the 1970s when the Village received a federal grant for economic development, and since that time the Village has made loans to 17 start-ups or local businesses, including Antioch Bookplate, the Organic Grocery, the Winds Cafe, Clinical Radiology, Custom Communications, Gypsy Cafe and Peach’s Grill, among others.
However, the loan fund has been largely stagnant for the past several years, partly due to lack of money, and the committee to oversee the loans has not convened. A $300,000 no-interest loan made in 2004 to Community Resources for the purchase of the 40 acres to house the Center for Business and Education largely depleted the fund and has not yet been repaid, as delays in construction on that land have meant that the center is not yet ready for occupancy. When the loan was made, Community Resources leaders said they would repay the loan when businesses locate at the center, which also houses Antioch University Midwest. Currently, the center is slated to be ready for occupancy in 2011.
The fund’s positive balance is $28,022, according to a report by Village Finance Director Sharon Potter, which is higher than in recent years due to some loan repayments.
Active loans are to Euphorbia and Gypsy Cafe, made in 2000 and 2001, and Peach’s Grill, made in 2007, along with the loan to Community Resources. Gypsy Cafe owners, who have since closed their restaurant, owe about $20,000 on their $50,000 original loan and Euphorbia, which closed several years ago, owes about $8,892 out of a $30,000 loan, and the Village is not receiving payments currently from these borrowers. The Economic Development Revolving Loan Fund committee has agreed that legal means should be pursued to recover these loans, according to committee member Ellen Hoover at the meeting.
Peach’s remains current with repayments on its loan from the Village. The business has paid $8,714 in principal and $1,853 on interest on the loan, according to the fund report.
In the years since the fund began, it has lost about $15,000 due to not having recovered the complete loans made to the Craig Mathews law office, Life of Riley and No Horsin’ Around. However, the Village reached court settlements for partial repayment from Mathews and Life of Riley.
At the Aug. 2 meeting, Hoover and Council members agreed that the loan fund should be more active, and that the committee, which has not met for some time, should meet soon. Village staff will organize the meeting.
Asked her opinion about the best use of the current fund balance, Hoover, who formerly directed economic development efforts for Springfield, said that micro-loans to several small businesses would be a better use than one or two larger loans. The micro-loans could be used to hire consultants to advise on regulations, an area in which start-ups frequently make costly mistakes due to a lack of awareness, Hoover said.
Current Economic Development Revolving Loan Fund committee members are Hoover, Perry Stewart and Fritz Leighty.