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Opinion Editorials Micro-loan program is good for city’s economic climate
Micro-loan program is good for city’s economic climate
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The City of La Grande saw a window of opportunity and stepped through it with the newly approved micro-loan program. Designed for small-scale, short-term gap financing, the micro-loan program is a proactive step the city is taking to counter the effects of economic uncertainty. The program the city council recently approved will help improve the economic environment so that people can think positively about opportunities for growth. With all of its carefully crafted fail-safe measures in place, the program should contribute to community vitality. The micro-loan program works like this: The micro-loans will be in amounts up to $5,000 and may be used for working capital, equipment or inventory purchase, marketing and advertising, and more. Ineligible activities include refinancing of debt, investment purposes not related to the business and payment of taxes. Of course, as Economics 101 will tell you, there is no such thing as a free lunch. Survival of the program depends on borrowers paying the loans back, usually over a 36-month period. Interest rates for micro-loans will be set above the prevailing commercial lending rate. It would be one thing to recklessly extend credit. But the council has wisely set up a committee to oversee the program and review applications. That way, each prospective loan will get a thorough cost-benefit analysis to ensure each loan is mutually beneficial to the business owner and to the city with a primary goal being local businesses’ long-term sustainability. In capitalism, there will always be boom and bust cycles. If we can ride out the bust cycles through programs like the micro-loan, we can position ourselves for the coming boom and better times ahead. The micro-loan program will give some economic empowerment to local businesses and a little more economic security. Fiscal austerity remains important as we ride out the bust and prepare for the next boom. The micro-loan program will do its part to relieve economic anxiety. A thorough examination of the program’s costs and benefits will show that it is an experiment that should pay long-term dividends. |
