The Community Economic Development Fund”™s new micro loans for small businesses have moved to the front of the lending class as the loan market remains stalled.
The fund is making available low-interest loan money for small businesses in need. Terms are established by the state. Connecticut businesses with fewer than 50 employees may borrow up to $100,000 at 4 percent interest for repayment over a 10-year period. The loans may also be used in combination with other CEDF loans, up to a maximum of $500,000.
The Connecticut Business and Industry Association”™s third-quarter credit survey with TD Bank found that small businesses continue to face borrowing challenges. The survey found 40 percent of businesses had trouble getting credit and the majority of that percentage did not receive the full amount sought.
Borrowing has remained unproblematic for national companies including Westchester County-based PepsiCo, who are raising billions of dollars by issuing bonds at ultra-low interest rates. Few of the companies doing so are spending the loan cash on capital improvements or jobs; instead they are hoarding the money until the economy improves.
Peter Gioia, economist and vice president of the Connecticut Business and Industry Association, said the new loan opportunities offered by the Community Economic Development Fund may allow smaller businesses to move forward on stalled projects.
“Uncertainty is at the core of the difficulties Connecticut businesses are having when it comes to making investments and hiring,” Gioia said. “This is a difficult credit environment; these loans may give some aid to businesses feeling the pain.”
Donna Wertenbach, president and CEO of the Meriden-based Community Economic Development Fund, said the funds were appropriated by the state Legislature during the last session. Wertenbach said the loans are multipurpose. In addition to refinancing debt, businesses can use the loans for establishing credit lines, working capital, inventory, rehab and the purchase of commercial real estate.
As defined by the Small Business Administration, a small-business loan is any loan under $1 million and a micro loan is $35,000 or less. However, for an annual study it conducts, the SBA uses a $100,000 measure for a micro loan. Credit card purchases are included in the data.
The 4 percent interest micro loan is available statewide. Wertenbach said her organization also is administering a $4 million Southwest Connecticut Loan Fund to provide low-interest financing for businesses in Fairfield and New Haven counties, with the money provided by supportive banks.
