Coaldale aims to provide best business loan program

Posted on March 3, 2020 by Sunny South News

By Nikki Jamieson
Sunny South News

Businesses across Coaldale are now able to take advantage of an interest-free loan program with the town.

The Town of Coaldale announced that they were expanding their Business Improvement Loan program with Community Futures last month, opening it up to more businesses, increasing what it can be used for and upping the maximum loan amount.

“We’re really excited about the program. It’s a really great opportunity for this community and this business community to access funds at an incredibly low rate,” said Cam Mills, manager of economic and community development for the town.

“We’re very committed to finding programs that have limited administrative costs but high value for our community members, and this seems like a program where we can deliver tremendous value to the business community without a great cost on the back-end, and it’s exactly the type of program that the Town of Coaldale should be pursuing.”

The Town of Coaldale has participated in the program since November 2011. Previously, the program was exclusive to the downtown area, and offered interest-free loans to businesses of up to $10,000 to improve their business, with the town paying the interest on the loans.

“It’s an opportunity for businesses to access interest-free loans to improve the physical space of their business,” said Mills.

“It’s a program that we have been running for 10 years with limited success, and it’s something we saw as an opportunity to provide real value for our business community without accruing substantial costs on our end.”

However, over the years, interest in the program dropped off, and last year council had met with community Futures to discuss ways to improve it. After a survey and discussions were made with the town’s business community, the decision was made to open the program up.

Mills says the town has looked at other loan programs with Community Futures throughout southern Alberta, and among the zones they’ve looked at, their BIL program has the highest value.

One of the changes to the program is upping the dollar amount from $10,000 to $25,000 for the interest-free loans.

“We looked at what is available in other communities. We saw that for the most part $10,000 is the number that other communities use. But we knew from feedback from our businesses that there wasn’t necessarily a lot of value associated with doing the work and paperwork in applying for a loan for that sum. So we looked at $25,000 as an opportunity within our budget. Assuming businesses apply for the maximum value of the loan, we can support a little bit over six loans that way at a time through this program.”

Mills says the new $25,000 amount was higher than any other BIL program they’ve seen, but was also a manageable number for the town.

The loan can be used for changing the physical space of a business, whether it’s outside or inside the building. One of the new uses for the loan include utility improvements.

“For example, the businesses along Main Street, where Main Street is being dug up and redone, those businesses can access the loan is they want to improve their water line or sewer line to improve capacity there. Given that Main Street is going to be open, it’s going to be cheaper for them to do it now, and now we can provide a loan to do it as well, so it’s kind of an extra incentive to do that work.”

Another new use is greenscaping, so if for example, industrial businesses need to do additional greenscaping, tree planting or beautification, the loan can be used for that. What the loan can’t be used for is things such as business equipment, as the loan is focused on the physical property of the business.

Another change is that the program now includes different types of businesses, as previously it was limited to businesses in the downtown core of Coaldale.

With the exception of home-based businesses, businesses all around Coaldale can now access the loan.

Although home-based businesses will not be eligible for the loan, a business in a residential area that is a separate business, that isn’t run out of the home itself, could be eligible. Mills says it all depends on how a business is classified.

“We expanded it to all businesses because from our perspective, we want to improve to appearance and appeal of all the businesses in the immunity. It makes sense for us to open it up widely,” said Mills.

“The reason we kept back on home-based businesses is because it becomes administratively very difficult to understand, to sort of parse what the funds are being used for; is it being used to improve the home or is used to improve the business aspect? And that, from our perspective, it would create a bit of an administrative burden on our end. One of the things we are always striving for is to find programs that deliver a high amount of value at a low cost to the town. So if it’s something that’s going to create a substantial amount of work relative to the return, and requires us to hire additional staff, it stops making sense.

“While of course we love home-based businesses, it’s just not a good fit for the program.”

Another change is that even if a business had applied for and received a loan previously, they can reapply once that initial loan is paid off.

“If they’re access the program previously, in order to apply for the new loan they will have to settle their debt on the previous loan. But once that’s done we’re happy to lend again,” said Mills, adding the only expense the business will occur is the application fee.

“Also, businesses have the ability to borrow more that $25,000, that should be made clear. Community Future, as the lender, will support loans I believe as high as $150,000, the interest will simply be paid by the town up to the first $25,000. They don’t need to go to two banks, so if they need $100,000, they don’t borrow $25,000 here and $75,000 from say RBC, they can borrow the full amount from one lender.”

The town currently have $10,000 budgeted for the program, which would allow them to pay the interest on $128,000 worth of loans.

Should the town receive more applications for the program than they can pay the interest on in a year, Mills said they will need to make a decision on how to approach the program, which he said was “a wonderful problem to have”, as it would mean at least $128,000 has been invested in local businesses.