Community Development Block Grant
New Haven, CT - Mayor John DeStefano, Jr.
Small Business Revolving Loan Funds
The City of New Haven's Office of Business Development uses CDBG funds to operate two revolving loan programs which have assisted small businesses in starting-up, expanding or relocating in the City. In turn, these businesses have created jobs which have been filled by low- income residents and benefitted lower-income areas of the City.
The first, the micro-loan program, finances loans to both start-ups and existing businesses located within the City. The program's goal is to assist businesses which otherwise would have little or no opportunity to meet their financing needs through traditional lending institutions. Technical assistance in developing and completing applications is provided through several community organizations including the Regional Business Resource Agency, the Yale School of Business, local bank programs designed for minority and women-owned businesses, and an outside minority business association.
Since 1996, the micro-loan program has provided financing to approximately 30 businesses. All loans are originated, closed and serviced by the City. The more than $500,000 loaned has returned over $64,000 in principal and interest in calendar year 1998 alone. The businesses have retained or created over 165 jobs within the City. Without CDBG funds, officials say, the City would not be able to provide start-up business financing and would not be able to attract local bank participation.
The second loan program began in 1997 when the City received a $5 million HUD Section 108 Loan in conjunction with a $1 million HUD Section 108 EDI Grant to provide business loans to existing City businesses or to existing businesses which desired to relocate into the City. Under this program, the City acts as co-lender for a portion of a participating bank's risk exposure. This has enabled the City, with minimal risk, to attract over $15 million in bank loan funds. The lending consortium arrangement has expanded and now includes four local lending institutions. The program currently has a participation ratio of $7.50 in bank or equity funds for every HUD Section 108 dollar invested.
This loan fund enjoys a reputation for fairness and accessibility while maintaining strict standards for accountability, and has closed 10 loans for over $2 million. These loans are also originated, closed and serviced by the City. The fund has been instrumental in assisting the City to retain 474 jobs and create an additional 130 jobs.
With the survival rate for businesses consistently above 80 percent, these two programs have been very successful lending endeavors. The loan funds also have proved to be a valuable resource for commercial property owners, providing them with a consistent source of new business tenants and potential real estate purchasers. Beyond this, however, officials believe that one of the most important aspects of these programs is the opportunity they have provided New Haven residents to realize the dream of starting and expanding their own business, and the opportunity they have provided the City to demonstrate its commitment to the empowerment of its residents. Both loan funds meet the CDBG requirement of providing at least 51 percent of all jobs to low-income individuals or benefitting a target area within the City.
Contact: Elizabeth Smith, Special Funds Project Coordinator, Office of Management and Budget, (203) 946-8390
The United States Conference of Mayors
J. Thomas Cochran, Executive Director
Copyright ©1999, U.S. Conference of Mayors, All rights reserved.