A $500,000 city loan fund will soon be available to provide start-up and expansion capital for fledgling Provo businesses, and officials hope for a payoff in the form of more new jobs.
Mayor Joe Jenkins told a meeting of local bankers Wednesday the new fund will complement, rather than compete with, area lending institutions by providing entrepreneurs with so-called gap financing.The loans, up to $100,000 for a single proj-ect, are intended to allow entrepreneurs to continue to develop their companies while searching for capital from more conventional funding sources.
The program, funded by federal community development block grants the city has received, will be as much a tool for business retention as for business development.
"About 85 percent of the jobs created locally are from brand-new companies," Jenkins said. "We spend a lot of time getting them to stay in the area. If people can't get the help they need locally, they go somewhere else."
A similar program in Orem has been operating for the past two years and is capitalized at just over a million dollars. The Orem program has lent more than $750,000 to 15 businesses in that city over the past year.
Orem economic development officials credit those loans with creating a 133 jobs during that period and say another 168 jobs will be created this year as those loans continue to help small businesses grow.
Provo officials will require that companies create at least one job for each $10,000 they borrow from the fund, said Albert Kanahele, small-business liaison for the Provo Economic Development Office.
The city hopes to promote a three-way partnership of business, lending institutions and government to stimulate private investment in local small businesses, Kanahele said.
By lending money to qualified companies, Provo hopes the borrowers can develop to a point at which they can attract additional capital, either through other development programs or from venture capitalists and other lenders.
Borrowers will repay the loans at negotiated interest rates based on the prime rate. Repayment schedules will be flexible.