Authority has funds to loan out

FAIRMONT — Do you dream of starting your own business? Do you want to expand your existing company?

There’s always that pesky issue of money, but obtaining funds doesn’t have to be a deterrent. In fact, the Fairmont Economic Development Authority is actively seeking borrowers.

FEDA has various “pots” from which to make loans, and there’s money available in all of them.

The micro loan fund is for smaller transactions, those less than $10,000. A non-reportable loan fund has $430,000 available, and these loans are not tied to job creation.

Meanwhile, with $200,000 available to lend, the reportable loan fund requires the creation or retention of one full-time job for every $10,000 borrowed.

It is the reportable fund available balance that recently caught the attention of Linsey Preuss, Fairmont economic development director. While consulting a quarterly report from the city’s finance department, she noticed a balance under “amount of excess cash for reporting period.”

“With federal EDA, we have guidelines that we have to follow,” said Preuss, explaining that the money in the reportable loan fund originally came from the federal government. “Right now, we are reporting $57,000 more cash in hand than we are allowed to have based on our total loan portfolio. We want that number to be zero.”

There could be a few reasons for the excess cash reported, she said. With the economy in an upswing, banks are more comfortable making loans for new and expanding businesses. People also might not be aware that FEDA has funds available.

Currently, borrowers for all 19 existing loans are making prompt payments with no account in arrears.

Reportable loans can be used for building acquisition, expansion, machinery and equipment, inventory and real property acquisition.

Preuss dispelled the myth that the city would be excessively involved in a business if a FEDA loan was acquired.

“There’s no extra strings. We just act as a loan department,” she said.

FEDA also is not in competition with local banks.

“In fact, that’s never been an issue,” Preuss said. “We literally work hand in hand with the banks. They like to partner with us because that reduces their risk. I will call them for info. They will call me for info. We package it together.”

For example, if a bank requires a 25 percent down payment for a commercial building, loan funds from FEDA, which offers a competitive interest rate, can be used as part of the down payment.

“We still want the person to come in with some cash, but we can leverage it as a down payment,” Preuss said.

Loans should be secured, but FEDA would be subordinate to the primary lender, somewhat like a second mortgage. Loans can be made for up to 20 years, with a balloon payment midway through the term of the loan. This allows FEDA to re-evaluate each loan.

“The balloon means you’re making payments like it’s a 20-year loan, but with a balloon in 10 years, we can re-evaluate it,” Preuss said. “We can extend it. Do you still need the loan? Do you need more? A lot can happen in 10 years.”

If a smaller amount is needed, Preuss recommends the micro loan fund.

“If you want $10,000 or less, we do have this fund, and I can approve that myself,” she said. “I don’t need to take that to the board. It doesn’t have to go through the whole process so it’s much easier to get.”

Preuss said the winter months are an ideal time to plan for a business’ start or growth.

“If somebody is thinking about doing something, now is really a good time to get a project started,” Preuss said. “You can plan and then, if there’s any construction involved, we’ll have everything ready to go by the spring. Contractors like to have their work lined up by then.”

For more information about FEDA and its loan programs, contact Preuss at City Hall, (507) 238-9461.