TITLE
Recommendation to authorize City Manager to deposit additional
$350,000 in Community Development Block Grant (CDBG) funds into the Grow America Fund, Inc., enabling the City to continue to make SBA 7(a) loans to eligible businesses. (Citywide)
DISCUSSION
On May 20, 1997, the City Council authorized the City Manager to execute an agreement with the Grow America Fund, Inc. (GAF) for the purpose of establishing a business loan program to be known as the Grow Long Beach Fund. The program began June 1, 1997 and will continue until the final loan is repaid. Other business loan programs offered by the City are the ,Capital Availability Program, the Revolving Loan
Fund, and the Microenterprise Loan Program.
The National Development Council is a nationwide private non-profit organization designated as a Small Business Lender and is qualified to serve as a Small Business Administration (SBA) 7(a) lender. The GAF is operated as a subsidiary corporation by the National Development Council and establishes agreements with client cities across the nation to extend SBA 7(a) financing to local businesses.
Participation in the GAF allows the City access to the SBA 7(a) loan program. The SBA guarantees a portion of the loan, usually 75 percent, and the GAF sells the guaranteed portion to investors. The sale proceeds are used to make other loans. The remaining 25 percent of the loan is retained in the GAF and collected on behalf of the City. This arrangement leverages the City’s Community Development Block Grant (CDBG) funds and reduces participation and risk in each loan. The City has deposited a total of $800,000 in the GAF since 1997. The GAF has provided 19 loans totaling $6,109,500
to eligible Long Beach businesses that meet CDBG criteria. As of March 31, 2005 net earnings retained in the program total $94,429, which have been used to make new loans.
Currently, funds available for lending under this program have been exhausted. The requested $350,000 will provide t...
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