The revolving loan program has been a spot of contention for the McCreary County Fiscal Court for a while, and has been on hold for the past couple of years as the County has struggled with several of the loan holders not paying back their debts.
But, that is about to change as the Fiscal Court approved new guidelines for the program.
During Friday’s Fiscal Court meeting Judge Executive Doug Stephens stated he and Magistrate Leroy “O.L.” Perry had met, at the Fiscal Court’s request, to discuss changes to the program with the intention of making low-interest business loans available to the public once again.
Judge Stephens presented his proposal – establishing new guidelines for the program, which has about $122,000 available to loan.
The new terms for a small business seeking a loan include:
The total amount loaned to a business or start-up capped at $15,000. Judge Stephens noted the loan program should no be considered as a sole source of financing for a company, and the lower loan amount would prevent such an issue.
Terms of any loan would be at a 3 percent interest rate with a maximum term of 8 years. All loans must also be fully secured, with the County listed as the primary lien holder.
All loan applicants must submit the request to the Judge Executive’s Office, which will be reviewed by the McCreary County Economic Development Board. (Judge Stephens noted the Board is still in place, but had not met in a while due to the lack of an Economic Development Director.)
The Board will review the application, and make a recommendation to the Fiscal Court whether to approve the loan or not.
Judge Stephens stated all but two or three of the past loans have been refinanced, with the majority of loan holders making payments. He admitted some holders have missed payments, but mechanisms are in place to correct those situations.
The loans that have not arranged for refinancing, and are in serious default, will be published this month and legal action taken against them.
The Court unanimously approved the Judge’s recommendation to reauthorize the program under new guidelines.
Since it’s inception in 1994 the County has run a Rural Business Enterprise Grant program, funded mainly through USDA funding. Other federal funding has also been incorporated into the program as the Fiscal Court voted to unite all monies in to one fund a few years ago.
The purpose of the program was to be able to provide low-interest loans to new and existing local businesses as a means to help encourage economic growth.
But, the program has ran in to difficulties along the way, with many businesses defaulting on their loans, and a failure to properly administer the program in the past has left many of the loans uncollected.
Several of the older loans, dating back more than eight years for instance, had to be written off as uncollectable bad debts due to a lack of proper documentation or collateral attached to the loans.
For the past couple of years the Fiscal Court has authorized a grace period for several delinquent loan holders, allowing them to renegotiate the terms of the agreements.
The individuals who have taken advantage of the amnesty have been allowed to restructure their loans, mostly with a lower interest rate and a new schedule for repayment.