Hector Perez

By Hector Perez

 

The city’s Economic Development Department is hoping to increase awareness of its Family Business Loan Program by directly reaching out to business owners.

 

The program uses federal money to provide low-interest loans to small local businesses. Vicky Valdez, manager of the program, saidthe new approach comes from a need toreach owners whose businesses may not allow them the time to learn of the program’s benefits.

 

“We find that business owners are just so busy in managing their business these days in Austin, because of our robust economy, that they really can’t get out,” Valdez said. “We decided, let’s go out. Let’s go out, let’s go out into their environment and go visit with them.”

 

The first of these “walkabouts” took place on April 18 when city representatives spoke to business owners in East 11th Street, East 12th Street, and East Riverside Drive. More are scheduled in other parts of the city through May 8.

 

The program began in 2012 after the city received a $3 million loan from the U.S Department of Housing and Urban Development. Known as a section 108 loan, the money can be used for activities ranging from economic development to housing rehabilitation.

 

In the years since the program’s approval, three businesses have closed loans for a combined $700,000 whilethe rest of the original budget has been committed to loans that are waiting for approval. Because of this success, HUD’s allocation to the city has grown to $8 million.

 

To qualify for the program, businesses must meet guidelines that include financial proof of recent growth, a net-worth less than $15 million, and a commitment to create one job for every $35,000 borrowed.

 

Among the businesses that have closed loans through the program is Eat Ban Mi, a Vietnamese restaurant located near downtown Austin. Owner Tram Le says the process to approve her $35,000 microloan took longer than expected because she was one of the first to people to apply.

 

“They had to go through quite a bit of ‘oh this is right or this is wrong’,” Le said.

 

Le differs from other people who have used the program in that her $35,000 microloan is the only loan she has. The program is even more beneficial for owners who want to apply for large loans from banks.

 

Valdez says that on such loans many banks are unwilling to take on the risk of “working capital”, or the money necessary to pay off short-term debt. If a bank provides 60 percent of the loan and the owner of a business is willing to provide the required 10 percent equity injection, the city would provide the remaining 30 percent at a very low interest rate.

 

“It’s not gap financing, meaning the portion that the bank won’t do,” Valdez said. “It’s the portion that makes it more attractive for the bank because the bank doesn’t normally do working capital, furniture, and fixtures, things like that.”

 

In hopes of spreading such information, the Economic Development Department has increased advertising of the program through social media campaigns and by personally reaching out to business owners. However, Valdez says many people continue to learn of the program through a less sophisticated way.

 

“Word of mouth,” Valdez said. “We’re getting calls because friends of friends of business owners know other business owners. It’s just the way it works. ”

 

As for future funding, Valdez says she’s confident that the program’s continued success will lead to more allocations from HUD.

 

“The more success that we have with this program, the more leverage we have as to go ask HUD for another allocation,” Valdez said. “We have not been told no, but we know that history is in other cities that have had success with the program, asking for additional allocations is feasible.”