City of Aspen to grant small business loans
The city of Aspen is fast tracking a loan program that will dole out money to local businesses at a 1% interest rate in an effort to help them survive the COVID-19 economic crisis.
Aspen City Council on Tuesday signed off on a small business revolving loan program during a work session.
As part of its $6 million COVID-19 relief and economic recovery program, $200,000 has been earmarked for loans.
Council members want to prioritize the 26 businesses that were not eligible for the city’s rent relief grant program in which $1 million was spent by covering a third of a business’ rent for as long as three months this past spring.
Landlords had to agree to cover a third of the rent as well, which took some businesses out of the running because property owners didn’t help their tenants.
About 112 Aspen businesses did receive rent relief from anywhere between $2,000 and $14,000.
“We are sensitive to people who were denied the rent relief and we’d like to give them a fair shot at this without restriction,” said Ron Leblanc, the city’s special projects manager.
Mitch Osur, the city’s director of downtown services and parking, said he and the team were planning to reach out to those businesses first.
“I think those who did not get anything in our grant program reality is setting in for them,” he said last week.
The revolving small business loan allows businesses to borrow as much as $30,000 at 1% with a payback over four years, with no obligation to make a payment for six months.
The program provides access to funding for businesses that may not otherwise qualify for traditional bank loans.
The intent is to help businesses get back to sound financial footing in four years so they can then qualify for commercial loans through existing Aspen banks, according to LeBlanc.
As a revolving loan program, payments will return to the fund to be loaned out again to additional qualifying businesses or start-ups.
That money could circulate in the community four or five times.
“The cool thing is if this works it will be a perpetual thing and we get paid back and we keep it rolling,” Osur said. “The big picture in all of this is that we can help businesses long term.”
Osur, who is the main liaison between the municipal government and the business community and is on the ground daily, said business owners for the most part are appreciative of the city’s efforts.
That in turn has strengthened what has been a rocky relationship in the past, Osur noted.
“It’s the first time the business community feels there is a partnership with the city, so there is some good will there,” he said.
LeBlanc told council that city staff will come back to it in a year to evaluate the program and see if any local banks want to participate.
The city will contract with the nonprofit Colorado Lending Source, which has an office in Glenwood Springs.
The city can modify their standard application form to suit local needs, develop loan criteria to meet council goals, as well as utilize their experienced loan officers to review and rank applications, and benefit from the wisdom of a veteran loan review committee, according to LeBlanc.
“As talented as they are, (city staff) do have that expertise,” he said at Tuesday’s meeting.
The city will pay the 1% closing costs to Colorado Lending Source so that the borrowers are not burdened.
City staff envisions four loans at $30,000, two loans at $20,000, one loan at $15,000 and two loans at $10,000.
Colorado Lending Source closing costs are estimated at $2,000 and “miscellaneous” costs of the program are projected to be $3,000, which the city will cover.
The city is scheduled to begin accepting applications Aug. 3, with the first wave of applicants evaluated until Aug. 14 and initial loans approved on Aug. 19.
Mike O’Donnell, executive director of Colorado Lending Sources, said his organization is dedicated to helping small businesses throughout the state and has helped hundreds received federal PPP loans.
“Our focus is really in trying to help businesses survive this pandemic and get ready to rebuild … so they can be prepared for 2021,” he said.