City could back small business loans

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The city could have a new tool for providing financial assistance to small businesses – and it theoretically shouldn’t cost taxpayers a dime.

The City Council is considering approving a new plan proposed by the city’s economic development department that would help ensure new or existing businesses get the loans they need.

Under the proposed Small Business Loan Guaranty Program, a small business looking to relocate to or expand in Noblesville could apply to have the city as its cosigner. If the business applied for an $80,000 loan but was only approved for $70,000 on its own, for example, it could apply for Noblesville to guarantee the other $10,000.

“We put a lot of emphasis on new business recruitment, but we want to find an incentive to provide our small businesses,” said Assistant Director of Economic Development Christy Langley. “While the larger firms are letting people go, the smaller firms can stay put and continue to grow.”

The city would not pledge more than $25,000 on any loan or any amount exceeding 20 percent of the total value. Any businesses, new or existing, applying for the program must meet a list of criteria to be considered, including creating at least one job for every $25,000 borrowed. Applicants also must provide a documented business plan, credit report, cash flow projections and a written explanation detailing how starting or expanding their businesses will benefit Noblesville taxpayers.

Before any agreement is finalized, each application will come before the council for final approval.

“The banks will undertake 80 percent of the risk. We’re taking 20 percent so it’s not like this will be available to anyone walking in off the street,” said city attorney Mike Howard.

Before proposing the plan to the council, the economic development department conducted four case studies in cities such as Muncie and Kokomo which have similar programs. In each case, Langley said there were few defaults on city-backed loans, if any, and most of the defaults occurred early in these programs before increased restrictions were put into place.

Langley said this program should help retain and create jobs in Noblesville. According to data from the Small Business Administration and the Kauffman Foundation, respectively, small businesses have generated 64 percent of the net new jobs over the past 15 years and small businesses account for more than 97 percent of Indiana’s employers.

“This is a good use of taxpayer dollars and hopefully we won’t have to use any of them,” said Councilman Greg O’Connor

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