Kingsport announced in October 2006 the launch of a small-business micro loan pool to help with redevelopment efforts in downtown.
The crux of the program was a group of banks would loan money to people who could not secure traditional loans. Applications would be submitted to the Kingsport Office of Small Business Development and Entrepreneurship (KOSBE ), the Kingsport Community Enhancement Corporation (KCEC) would oversee the program, and a Micro Loan Review Committee (made up of four members) would review and approve the loans.
The program, however, never managed to actually loan any money, for a couple of reasons — less than expected funding commitments from banks, and a failure to obtain nonprofit status from the Internal Revenue Service. The state of Tennessee actually lost the KCEC check when it applied for its tax-exempt status last year, which forced the organization to apply again in September.
In a press release, the KCEC said the decision to dissolve was due to recent successful efforts by KOSBE to locate several alternative sources of funding for businesses while the loan pool program was being established.
Aundrea Wilcox, director of KOSBE, outlined some of these alternative programs now available:
•The ECD-BERO Micro Loan Fund, introduced in October 2006 by the USDA, which targets businesses in rural areas. Loans to start or expand a business are in the amount of $10,000 or less.
•Southeast Community Capital, a nonprofit organization created in 1999, assists businesses in low- and moderate-income communities in the Southeast, with the average loan size being roughly $70,000.
•The Small and Minority-Owned Business Assistance Program, which is a part of the state’s Treasury Department. The program offers a maximum loan of $125,000 with interest rates ranging from 2 percent below prime to 2 percent above prime.
•The Georgia Certified Development Corporation, which has lent more than $70 million and created/retained over 2,405 jobs since its creation.
Wilcox said doing away with the loan pool was a good thing, adding KOSBE has been able to help a lot of people with their financial needs through these secondary lenders.
“The board met and agreed, we have the resources that we need. We didn’t have those resources at the time we conceptualized the micro loan,” Wilcox said. “Many of the programs were not there or the connection had not been made at the state level or at the secondary level.
“There are funds out there through these other sources, and if we just network and work together like we’re supposed to be doing on a regional basis, it will work itself out.”
The KCEC had one approved loan through the loan pool — $32,000 F&L Limo and Livery — but was unable to disburse funds. Wilcox said the business has been put in contact with one of the secondary lenders.
“I’ve had no choice but to go out and find some other funding for them,” Wilcox said.
Alderman Ken Marsh, chair of the KCEC board and the one who came up with the idea of the loan pool, said he was not disappointed with the dissolution of the program.
“The reason we did away with it was because we got a much better deal for everybody. We’ve got four or five different sources to treat the same situation, generally in the private sector,” Marsh said. “It didn’t seem to be a reasonable thing to compete with ourselves by subsidizing something like private enterprise loans, and there are people out there who are willing to do it — prop up our companies. This is the perfect solution.”
The history behind the loan pool dates back to the Board of Mayor and Aldermen’s budget talks of 2005.
At that time the city was exploring ideas for downtown redevelopment, and one idea came from the Kingsport Housing and Redevelopment Authority — the creation of a downtown redevelopment fund, which would be money loaned or granted to business owners for smaller redevelopment projects.
The KHRA suggested the redevelopment fund be funded by a portion of any approved tax increment financing (TIF) in downtown. The BMA reduced the funding level from 20 percent to 10 percent but promised to put $500,000 in seed money into the fund.
The seed money would have come from a 5 cent hike to the property tax rate. However, Marsh successfully lobbied the BMA to support his plan for a loan pool to come up with the money and not increase property taxes by a nickel.