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r <br /> ORANGE COUNTY <br /> BOARD OF COMMISSIONERS <br /> ACTION AGENDA ITEM ABSTRACT <br /> MEETING DATE: August 4, 1997 <br /> Action Agenda <br /> Item # q. C.. <br /> SUBJECT: Orange County small Business Loan Program <br /> DEPARTMENT: EDC PUBLIC HEARING: Yes_No X_ <br /> BUDGET AMENDMENT NEEDED: Yes No <br /> ATTACHMENT(S): INFORMATION CONTACT: <br /> Summary of Loan Programs (5-9) Ted Abernathy(ext. 2325) <br /> Draft Loan Program Operating Geoff Gledhill (732-2196) <br /> Policies&Procedures (10-19) TELEPHONE NUMBERS: <br /> Attorney's Letter(4/25/97) (20-21) Hillsborough - 732-8181 <br /> Summary of Small Business Loan Program(22) Durham - 699-7331 <br /> Mebane - (910) 227-2031 <br /> Chapel Hill - 967-9251/9684501 <br /> Purpose: For the Board of County Commissioners to consider authorizing staff to proceed with <br /> legal actions required to initiate the Orange County Small Business Loan Program. <br /> Background: The Orange County Economic Development Strategic Plan states: "The EDC <br /> should expand financial options by developing an Orange County Loan Pool for small businesses." <br /> At the strong encouragement of the EDC Board of Directors, staff began working to develop a <br /> loan pool in 1995. Initially, meetings were held with local small business assistance providers and <br /> bankers to determine the major obstacles preventing additional small business lending locally. <br /> Three areas were identified as being problematic for borrowers. First, banks are reluctant to fund <br /> small requests because of the lack of profitability. Second, conventional lending sources typically <br /> require a large percentage of owner equity to qualify for a small loan, usually in the 50%range. <br /> Third, any problems with the credit history of a potential borrower can make an already difficult <br /> loan impossible. <br /> After identifying the gaps, various types of public sector programs were examined. <br /> The City of Charlotte and thirteen participating banks offer loan assistance to new and expanding <br /> businesses located within the uptown part of the city. The focus is on producing jobs for low to <br /> moderate-income individuals. The bank provides 80 percent of the loan amount and the city <br /> provides 20 percent, which serves as equity. The rate on the bank portion of the loan is prime <br /> plus 1.5 percent. The repayment of the city-extended portion of the loan does not begin until the <br /> bank portion is paid off, as a result, the city portion is considered as equity. Since the program <br /> began in 1991, 65 loans have been made for a total of$8.9 million. <br /> This revolving loan fund aims to provide capital for start-up or expansion of small and/or minority <br />