Princeton, Indiana, has set up a low-interest revolving loan program, to make loans of up to $10,000 to downtown businesses. Travis Neff wrote about it in the Princeton Daily Clarion, City hopes to foster downtown progress with loan program.It’s a partnership of the city government and the Umbrella Committee on Downtown Revitalization.
The city was awarded a $50,000 Rural Business Enterprise Grant by the U.S. Dept. of Agriculture intended to develop small businesses in communities with a population less than 50,000. The city provided a $5,000 match for the loans in addition to the USDA money.
Loans will be made at two points below the prime interest rate. Interestingly, businesses can borrow for almost anything, including operating expenses, and priority is being given to businesses on the downtown square.
This is “use it or lose it” money. The city does not get the money up front; money only arrives after a loan is approved. If they don’t approve loans within one year, they must reapply for the grant. Unfortunately, I think they have put too many hurdles into the application and approval process. This is a really common committe thinking process.
After an applicant provides information about their enterprise, a representative from each of the five city banks will examine their credit history and advise the committee if they believe it is a sound idea to loan money to the owner.
The committee would then review the applicant’s business plan and ultimately decide who may receive a loan.
I don’t think the goal is to only make super-safe loans. You have banks for that. This type of loan fund should fill a funding gap in your business community.
Any small town or rural county can consider applying for RBEG funding to set up a simple revolving loan fund. Make sure you study existing examples first!
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Becky started Small Biz Survival in 2006 to share rural business and community building stories and ideas with other small town business people. She and her husband have a small cattle ranch and are lifelong entrepreneurs. Becky is an international speaker on small business and rural topics.