SHENANGO VALLEY Enterprise zone plans pilot loan program

The agency created a pilot program offering loans for labor and materials costs.
By HAROLD GWIN
VINDICATOR SHARON BUREAU
SHARON, Pa. -- The Shenango Valley Enterprise Zone Corp. is looking at a new way to lend its money.
The nonprofit agency, formed 20 years ago to provide financial assistance to new or expanding industrial and manufacturing businesses, has more than $1.7 million available to lend to companies within the zone boundaries, but demand for its financial assistance has waned over the past couple of years as conventional bank loan interest rates dropped.
John Evans, chairman of the organization's loan committee, told the board of directors Wednesday that the loan committee wants to launch a one-year pilot program that would make low-interest loans available for working capital.
Loans are limited to the purchase of equipment or land and buildings, and those securing loans must create new jobs.
The working capital loans wouldn't have that requirement, Evans said.
The board gave the loan committee approval to draft and implement the one-year effort.
"I think it's a wonderful idea," said Bob Donatelli, a board member. "It's about time we did something for the existing businesses."
Specifics
The board's approval includes setting aside $300,000 of the $1.7 million loan fund for the program, and Evans said the loan committee will probably recommend loans no larger than $100,000 to a single company.
The money would be available for labor and material costs for specific contracts that a manufacturer is trying to fill, he said, referring to it as a "contract financing" program.
Applicants for the loans will likely have to supply a purchase order, cash-flow projections and a plan to pay back the money, he said.
The loans probably will be close to the prime interest rate and would last only for the duration of the specific contract the borrower is filling, he said.
The program would look primarily at start-up companies and current companies that may be struggling and unable to secure favorable interest rates elsewhere, he said.
All loans would still have to be approved by the full board of directors, he said.
There is some risk to the program and it will require considerable oversight by the zone's coordinator, Evans said. The only collateral that may be available on these loans is a lien on the accounts receivable for that specific project, he added.