City considering micro-loan program

Published 2:07 pm Friday, August 22, 2008

While a long way from extending loans to small business owners, the La Grande City Council is considering the idea of a micro-loan program aimed at helping distressed businesses that don’t qualify for traditional financing.

At a council work session Monday night, City Manager Robert Strope said that if the governing body was supportive of such a program, staff would review options and bring back a specific proposal.

At the same time, Strope said he sees possible pitfalls in the idea.

“There are a number of communities in Oregon who do micro-loans, with mixed success. To be very frank and upfront, this would be a risky venture,” he said.

In a written staff report, Strope said the city has extended small loans to businesses in the past for a variety of uses.

He said one loan is currently outstanding, with the borrower making interest payments and scheduled to pay the balance this fall.

The city’s Urban Renewal Program provides some business projects with support in the form of grants or loans, but there is no program designed to help businesses with their programs of operation.

The Northeast Oregon Economic Development District, a public, non-profit organization serving the region, has a program for providing loans to area businesses. Currently, though, all the funds are committed.

Strope said a city micro-loan program could serve as a resource for businesses that are in danger of going under.

“This type of program could provide assistance to businesses in the downtown that might otherwise relocate or go out of business,” he said.

The idea drew a tepid response from most councilors, including Gary Lillard who agreed with Strope that the risks are great.

“We’ve done this kind of thing in the past, and frankly it hasn’t worked well,” he said. “We’d need more structure to give us some level of protection. Without that, I don’t think I’d be interested.”

Councilor Steve Clements said he liked the idea of helping the city’s small businesses, but also thinks the city should keep the risks small.

“I’m intrigued by the idea. I don’t see large blocks of money going to one person. If we had a system where we were not giving more than $1,000 to $1,500, it could be a good thing.”

Merlyn Baker, owner of Foley Station restaurant on Adams Avenue, sat in on the session and offered the perspective of a downtown businessman.

“When we go to a bank for a loan, they put us against all the restaurants or retail stores in the nation and if we don’t fit the formula, it doesn’t work,” he said.

He added that on the rare occasion that a traditional lender does agree to make a loan for business operations, interest rates are unreasonably high.

“It can be as high as 50 percent. What the business is doing is buying money, and it’s very expensive,” he said.

Work sessions are brainstorming sessions in which no formal decisions are made. The council decided the micro-loan program proposal, though not without merit, needs more study and refinement.

Strope was directed to do more research on programs in other communities, and bring a report back.

In another item during the Monday meeting, the council heard a report from Strope on a proposed parking lot agreement with ODS.

Currently, the city is negotiating an easement as part of the partnership between the city and ODS for the development of the ODS and city library at the corner of Fourth Street and Adams Avenue.

ODS wants to retain ownership of the parking lot and assume responsibility for maintenance. The city would have use of the lot as it does currently.

In exchange for retaining for the property, ODS would transfer ownership of a lot it owns at the corner of Adams Avenue and Second Street.