Des Moines to launch a business loan program
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The city of Des Moines is launching a new low-interest, small-dollar loan program for businesses with 20 or fewer full-time employees.
Why it matters: Loan rejections and prolonged borrowing approvals have been tough for small businesses in recent years.
- Access to small loans are especially challenging and could be enough to make or break a business, Nick Tarpey, the city's economic development project manager, tells Axios.
State of play: The Small Business Impact Loan Program is designed to fill that need — and support local entrepreneurship.
- City leaders commonly encounter smaller businesses or startups in need of help financing projects like building improvements or website design, he said.
Driving the news: The City Council approved the $100,000 program investment earlier this month.
- Applicants must demonstrate a lack of access to traditional loans due to things like limited credit history or a lack of collateral.
Zoom in: The loans will range from $5,000 to $20,000 and be fixed at two percentage points below prime rates.
- Repayment will take up to five years, which the city will re-invest in more loans to future applicants.
The intrigue: More than a dozen types of businesses, including gas stations, storage facilities, adult entertainment venues and tobacco stores are ineligible.
- The exclusions help focus the program on businesses with the highest economic impact on neighborhoods via factors like job creation and added foot traffic, Tarpey said.
The big picture: Officials from the Iowa Department of Economic Development have long recognized that access to financing is a challenge for small businesses, offering state loan programs to help them overcome some of the hurdles.
- According to a report last year from the U.S. Small Business Administration Office of Advocacy, about half of Iowa workers, or about 639,000 people, were employed by businesses with 500 or fewer employees.
What's next: The application process launches early next year, and the first loans will be approved in March.