An economic development loan program seems to be working, but only four downtown Raleigh businesses have taken advantage of the opportunity since it began eight years ago.
The Downtown Loan Pool Program was created in 2004 to stimulate economic development and revitalization in the downtown area, particularly on Fayetteville Street. Recently, the program was expanded to include other major streets such as Wilmington and Hargett.
About $300,000 is allocated for the program; individual loans are capped at $50,000. The loan terms for previous businesses varied in interest from 3 percent to almost 6 percent, but the current rate hovers around 3 percent for a 10-year period.
The latest business to enter into the program was HL Empire LLC, which owns various downtown businesses, including the Raleigh Times Bar and Sitti Restaurant. Empire used the funds to retrofit the ground floor at 111 E. Hargett St. for a software company.
Luther Williams, the city's business assistance program manager, explained that a loan from the city is last-resort funding. Business owners must first seek financing from a traditional bank and be rejected before they can apply for the program.
Read more about the loan program in the document viewer below.
Sometimes, Williams said, business owners have extended their borrowing limit and just need a little more funding to get things going.
The loan funds can be used to purchase equipment or supplies, renovate space, expand products or services or to supplement cash flow.
Wilmoore Cafe partner Carter Worthy said they used funding from the program to purchase coffee equipment and to supplement working capital.
“Restaurant businesses are very hard to get off the ground and get started,” she said. “Having that access to a little more capital helped us to get open.”
The Wilmoore has been in its Wilmington Street location for about a year now.
Worthy found out about the program when she was involved with the Big Easy, which was the first business to take advantage of the program.
Because businesses have to be owner-operated, the program is geared toward small, mom-and-pop businesses. Worthy said that the program helps revitalize an important part of downtown and that it fosters growth, redevelopment and employment.
Few Businesses Participating
Paul Reimel, Downtown Raleigh Alliance's economic development manager, said that lack of marketing probably played a large role in the program’s underutilization.
The program wasn't promoted by the city, so few business owners knew about it. The DRA has since increased program marketing. Reimel said he is in the process of reviewing two applications and the program is slowing gaining momentum.
Williams said during the recession business owners may not have wanted to take on more debt. As the economy improves business owners may be more willing to take on more risk.
The narrow scope of just allowing Fayetteville Street businesses also may have had a slight impact. Since the program was expanded to include primary and secondary retail streets, there has been more interest.
According to city documents acquired by the Record, all businesses are either paid in full or continue to make regular payments. The Big Easy, for example, has since paid off its $50,000 loan.
Since businesses continue to pay back into the program, as of now there is no immediate threat to its future. Especially since less than the $300,000 allocated has been used.
But, if the program really takes off, Reimel said the DRA could advocate for more funding.
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