MONROE - The City of Monroe revolving loan fund has helped create nearly 250 jobs in the private sector businesses that borrowed money, despite a few notable financial setbacks, according to officials.
The city's revolving loan fund had 20 loans active between April 1 and Sept. 30 of this year, totaling $1.5 million. The loan amounts ranged from $18,000 to $250,000.
The business loans, initiated between 1998 and 2008, were expected to bring 75 more jobs into the city.
But the businesses are reporting 246 new jobs have been added, according to information released at the Revolving Loan Fund Committee meeting on Tuesday.
Three of the loans, one to Jenson Chiropractic and two to Barrett's Brick Cafe, are now considered in default.
But the amount still owed on the defaulted loans, $119,000, is only 8 percent of the total value of the active loans.
Committee member Michael Boyce noted the need for the revolving loan fund to make more direct loans, rather than bank participation loans, to businesses.
Monroe's fund is one of the few revolving loan funds that has bank participation, according to City Attorney Rex Ewald.
The participation relationship is not normal, Ewald said, but was originally included in Monroe's revolving loan fund structure to facilitate the lending, administrating and monitoring process for the loans funded by the Monroe Revolving Loan Fund. No one at city hall had the lending expertise needed at the time the fund was established, he added.
"The recent hits we've taken are the first ones we ever had - and they've been dramatic," Ewald said.
Boyce recognized that making loans directly to businesses could increase the risk to the city's loan fund, but he said it would also not put the city behind other creditors in collecting on collateral in the event of a default.
Making direct loans would also ease the burden on business owners who find they need to put up too much collateral for bank loans, he added.
"In this credit environment, I think the Revolving Loan Fund has a duty to do direct loans," Boyce said.
Committee members determined that a borrower would need some way to obtain a credit analysis for a direct loan application, and directed member Steve Bechtolt to investigate available mechanisms for borrowers to use.
Committee members voted Tuesday to write off $16,000 of the Jenson Chiropractic loan, after the fund receives $9,000 in proceeds from the sale of equipment from the business. The loan was approved in April 2004, and the business filed bankruptcy in March.
Ewald said the city could still collect on the outstanding balance, because the write-off is simply an accounting practice used by banks.
The other two loans in default were made to Barrett's Brick Cafe, which closed this spring, leaving the city with $94,000 remaining on the loans, a first lien on the restaurant equipment and fixtures and a second mortgage on the real estate property. Woodford State Bank holds the first lien on the building for a loan of about $250,000.
The committee and bank agreed Tuesday to lower the listing price of the property, for the second time this year, to $150,000 for the building and $10,000 for the equipment. The property had been listed at $195,000, with all equipment included, since September, down from the original asking price of $285,000.
The city would collect only the proceeds of any equipment sale, and losing as much as $84,000 on the loan,
Of the remaining 17 loans, two had been paid off by the end of September.
Two other loans, with $28,500 and $26,500 still owing, had missed payments.
As of Sept. 30, the Monroe Revolving Loan fund balance was $677,000.
The Monroe Revolving Loan Fund was set up through a Community Block Grant Program for business start-ups and expansions, particularly to create job opportunities.Officials: Loan fund
spurs job creation
The city's revolving loan fund had 20 loans active between April 1 and Sept. 30 of this year, totaling $1.5 million. The loan amounts ranged from $18,000 to $250,000.
The business loans, initiated between 1998 and 2008, were expected to bring 75 more jobs into the city.
But the businesses are reporting 246 new jobs have been added, according to information released at the Revolving Loan Fund Committee meeting on Tuesday.
Three of the loans, one to Jenson Chiropractic and two to Barrett's Brick Cafe, are now considered in default.
But the amount still owed on the defaulted loans, $119,000, is only 8 percent of the total value of the active loans.
Committee member Michael Boyce noted the need for the revolving loan fund to make more direct loans, rather than bank participation loans, to businesses.
Monroe's fund is one of the few revolving loan funds that has bank participation, according to City Attorney Rex Ewald.
The participation relationship is not normal, Ewald said, but was originally included in Monroe's revolving loan fund structure to facilitate the lending, administrating and monitoring process for the loans funded by the Monroe Revolving Loan Fund. No one at city hall had the lending expertise needed at the time the fund was established, he added.
"The recent hits we've taken are the first ones we ever had - and they've been dramatic," Ewald said.
Boyce recognized that making loans directly to businesses could increase the risk to the city's loan fund, but he said it would also not put the city behind other creditors in collecting on collateral in the event of a default.
Making direct loans would also ease the burden on business owners who find they need to put up too much collateral for bank loans, he added.
"In this credit environment, I think the Revolving Loan Fund has a duty to do direct loans," Boyce said.
Committee members determined that a borrower would need some way to obtain a credit analysis for a direct loan application, and directed member Steve Bechtolt to investigate available mechanisms for borrowers to use.
Committee members voted Tuesday to write off $16,000 of the Jenson Chiropractic loan, after the fund receives $9,000 in proceeds from the sale of equipment from the business. The loan was approved in April 2004, and the business filed bankruptcy in March.
Ewald said the city could still collect on the outstanding balance, because the write-off is simply an accounting practice used by banks.
The other two loans in default were made to Barrett's Brick Cafe, which closed this spring, leaving the city with $94,000 remaining on the loans, a first lien on the restaurant equipment and fixtures and a second mortgage on the real estate property. Woodford State Bank holds the first lien on the building for a loan of about $250,000.
The committee and bank agreed Tuesday to lower the listing price of the property, for the second time this year, to $150,000 for the building and $10,000 for the equipment. The property had been listed at $195,000, with all equipment included, since September, down from the original asking price of $285,000.
The city would collect only the proceeds of any equipment sale, and losing as much as $84,000 on the loan,
Of the remaining 17 loans, two had been paid off by the end of September.
Two other loans, with $28,500 and $26,500 still owing, had missed payments.
As of Sept. 30, the Monroe Revolving Loan fund balance was $677,000.
The Monroe Revolving Loan Fund was set up through a Community Block Grant Program for business start-ups and expansions, particularly to create job opportunities.Officials: Loan fund
spurs job creation