TITLE
Recommendation to authorize City Manager to modify existing business loans, deferring the borrower’s obligation to make monthly payments for twelve months; and extend the terms of the loans as appropriate. (Citywide)
DISCUSSION
In 1987, the City Council authorized the establishment of the Commercial and Industrial Revolving Loan Program (Program), which is capitalized by the U.S. Department of Commerce, Economic Development Administration, Community Development Block Grant (CDBG), Redevelopment Agency funding and program loan repayments. The purpose of the Program is to provide access to capital to retain, attract, expand, and create businesses in the City of Long Beach. Financing under the Program supplements, but does not replace, private lending. Since its inception, more than 300 loans have been funded, totaling more than $22 million. Under existing program language, City Council authorization is required to make loans for $100,000 or more and to make significant subsequent modifications to those loans.
In early 2009, staff worked with the City Manager to identify economic development strategies to assist existing businesses affected by the global recession. Staff proposes to modify the terms of certain existing loans made under the Program in order to allow the borrowers to defer payments for twelve months beginning April 1, 2009 until March 31, 2010. The loans would continue to accrue interest during the payment suspension period. The accrued interest would then be added to the principal balance and the entire new balance would be amortized over the remaining term of the loan. To keep the monthly payments from increasing significantly, a one- or two-year extension to the loan term would be added. The interest rate and other terms and conditions would remain unchanged. Another alternative is for the borrower to make interest only payments for twelve months and extend the term one year.
In February 2009, the Economic Development Bureau sent a le...
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