Ko Lyn Cheang photo
Divy Geli attends to a customer of 16 years, Maila Oksanen.
Audubon Street barber Divy Geli knows his shop would benefit from a cash infusion provided by a newly-announced low-interest loan program targeted at helping minority- and women-owned small businesses in New Haven.
What he’s not so certain of is whether it’s worth tapping into the program and taking out a loan he may not be able to pay back.
The new $1.5 million low-interest loan program in question is The Partnership Loan Program for Minority and Women-owned Businesses in New Haven and the Lower Naugatuck Valley, which was created through a partnership among The Community Foundation for Greater New Haven, HEDCO, Inc., the Amour Propre Fund and The City of New Haven.
City and state political leaders and nonprofit heads celebrated the launch of the new loan program Tuesday afternoon outside of the Community Foundation’s headquarters at 70 Audubon St.
The program itself offers low-interest and partially-forgivable loans for local minority and women-owned businesses in New Haven and the lower Naugatuck Valley cities of Derby and Ansonia.
Eligible businesses can apply for a loan of up to $25,000 with an interest rate of 4 percent.
The program aims to address an urgent need felt by small businesses in New Haven who found themselves unable to benefit from the first round of the federal Paycheck Protection Program, created to deal with the Covid-19 economic shutdown.
Because of the complicated application process and the fee structure, many of the funds ended up going to larger businesses or white-owned businesses like Shake Shack.
New Haven small business owners have called for the city government to work with more of them to ensure they do not get excluded from financial support.
“So many [small businesses] have been deeply threatened by Covid-19, and so many of them have been bypassed by the support that’s come from Washington,” said Mayor Justin Elicker during Tuesday’s event.
Mayor Justin Elicker speaks outside The Community Foundation for Greater New Haven.
Just 12 percent of Black and Latino business owners who applied for PPP loans reported receiving help, according to a survey by Global Strategy Group.
Many of the small businesses that this new loan program aims to benefit do not have accountants or access to lawyers needed to apply for federal aid. Others do not have credit lines to banks, and suffer from a badly-hit credit rating due to the pandemic-related economic crisis.
“Many are ineligible for the financial programs offered to the more privileged,” said Amour Propre Fund President Lindy Lee Gold.
“It is predicted that up to 40 percent of women and minority-owned businesses will not survive the losses,” she continued. “Many lack access to credit making it harder to survive these financial emergencies. Many are micro-enterprises providing a livelihood to the sole proprietor and a few employees at most. Profit margins are thin while other financial savings are often meager, making them vulnerable to sudden downturns.”
A Struggle To Repay Loans
Lindy Lee Gold speaks outside The Community Foundation for Greater New Haven.
Now, money is available to help specifically those small businesses that got left out. But some businesses owners like Geli, who runs Phil’s Hair and Spa, worry that they will not be able to repay the loans, given how badly affected they are by the pandemic and the economic shutdown.
Geli said his business has taken a hard hit as barbershops and hair salons were forced to remain shut until June 1. Sales have more than halved as customers are still afraid to come out, he explained.
If he got the loan, Geli said he would use it to pay rent and his employees, whose earnings have dwindled to as low as $80 a week.
When asked how the program will help small businesses who struggle to repay the loans, city Deputy Director of Economic Development Cathy Graves pointed to the terms of the loan, which she said are more favorable than traditional bank loans.
For the first year, businesses only have to pay interest on the loan, and interest is only 4 percent.
“If someone took out a $25,000 loan, if you’re New Haven-based, the first $4,100 is forgivable,” explained Graves.
New Haven businesses in good standing after 12 months are eligible for loan forgiveness of up to 16.67 percent of the original loan amount.
Graves also highlighted free training provided by the City of New Haven’s small business academy that will help new entrepreneurs develop a business plan and visit a bank to get a loan.
She described the loan fund as a “revolving fund” and emphasized the advantage of a loan program over a grant program, where businesses would not have to repay the money given to them.
“We have a fund that will self-perpetuate,” she said. “Because these loans are not grants, every dollar our partners give is leveraged, three times, and then its recycled over and over again for the life of the fund.”
Cathy Graves speaks outside The Community Foundation for Greater New Haven.
To qualify, the businesses must have been around for at least one year, they must be for-profits, and they must have 20 or fewer employees. They must also be minority-owned or women-owned, be located in the City of New Haven or the lower Naugatuck Valley, and they must be in good standing with the Department of Revenue Services (DRS).
“We don’t want to turn anyone away,” said Kim Hawkins, Vice President & Chief Operating Officer of HEDCO, Inc. If businesses are not in good standing with the DRS, Hawkins said they will work with them to address outstanding tax issues and allow them to still work with the loan program.
The program is a public-private partnership created through collaboration among The Community Foundation for Greater New Haven and HEDCO, Inc., who contributed $500,000 each, as well as the Amour Propre Fund and The City of New Haven, which contributed $250,000 each. The city’s portion comes from its federal CARES Act funding.
“We’re talking about [helping] 75 small businesses in neighborhoods New Haven, Derby, Ansonia, each of which employ a dozen, 15, up to 20 people, each of which has families who depend on it,” said The Community Foundation for Greater New Haven President and CEO William Ginsberg. “In the vast scheme of things, it’s a small number, perhaps. But in terms of the life of this community and the neighborhoods in our community, and our region, we think it can make a big difference.”
Click here to learn more about the new loan program, and watch the Facebook Live video below to see Tuesday’s full press conference.