Carrboro’s revolving loan fund has helped many small businesses take their first steps, but some failures have forced the town to re-evaluate how it works.
The fund was established in 1986 to help young businesses in Carrboro. It offers low-interest loans to businesses that promise to bring jobs to the town but have trouble securing enough private funding.
About $1 million has flowed in and out of the fund in its 25-year history, said Annette Stone, Carrboro’s economic and community development director.
But loan recipients Carrboro Creative Coworking and The Original Ornament closed this year.
Now, the Economic Sustainability Commission plans to re-evaluate the criteria for receiving a loan and the loan review process, Stone said.
The town will expand the way the loan can be used, moving it beyond small business start-ups.
At a Board of Aldermen meeting last week, officials motioned to extend the program to create emergency loans for businesses on East Main Street, which have been affected by a blocked sewer line.
Stone said the town could also add more conditions to loan terms, such as providing only part of a loan while requiring the business to obtain the rest from another source.
“It would be prudent to look at our loan underwriting methodology,” Carrboro Mayor Mark Chilton said.
Alderwoman Joal Hall Broun said the fund could also be improved if businesses were required to submit an annual progress report.
Though the board is looking at updates, Broun and Alderwoman Randee Haven-O’Donnell both said the businesses that closed did so due to external factors.
“In this challenging economic environment, an entrepreneur has to have a product or service people want to spend money on,” Broun said. “In more robust economic times, those businesses would’ve survived.”
Stone said that many iconic businesses, including Cat’s Cradle, Neal’s Deli, Jessee’s Coffee and Carrburritos, have benefited from the loan fund.
“This fund has revitalized Carrboro’s downtown,” said Matt Neal, owner of Neal’s Deli.
The loan requires applicants to demonstrate need — they must have been turned down by at least two banks to be eligible.
“The fund has really helped businesses go to a more optimistic and sympathetic lender,” said David Jessee, owner of Jessee’s Coffee and Bar.
Bill Fairbanks, who owns Carrburritos and received a $40,000 loan in 1995, said the loans’ flexibility and low interest rate set Carrboro apart.
Haven-O’Donnell said it is important to make sure the loan program succeeds in the future.
“Small businesses will always be worth it on a community level,” she said.
Beven Ramsey, a loan recipient and owner of Blu Icon Salon, agreed.
“It should always be available to Carrboro’s businesses—that’s the most important thing.”
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