Business loan

Norwalk to launch small business loan program with ARPA funds

NORWALK — An interest-free small business loan program, funded by money from the American Rescue Plan Act, is set to begin in Norwalk this spring.

The program, in partnership with crowdfunding platform Kiva and the National League of Cities, will offer loans ranging from $1,000 to $15,000 to local small businesses.

The city council’s planning committee last week approved a three-year partnership with the loan provider. The project will be submitted to the Communal Council for approval before implementation can begin.

Kiva operates similarly to GoFundMe in terms of crowdsourcing funds, but Kiva is a loan provider rather than a grant or donation system, said Sabrina Church, director of business development and tourism.

Small businesses upload their loan application with a description of the business and their needs to a database, and lenders around the world can provide funds starting at $25, Church said. After the business owner pays off the loan, lenders can direct the funds to another effort or withdraw their money.

“Instead of giving money to a friend, there is someone in Australia who can give money specifically for your loan,” Church said. “Kiva would then provide that business owner with zero percent interest.”

The loans are for local small businesses of the type that are not usually chosen by banks for larger loans.

“It’s something that’s a very small amount that a bank traditionally won’t lend because it’s not really worth their money or their time. They’re looking for those heavy hitters that need $50,000 or more,” Church said. “It’s your landscapers, your caterers, your limo drivers, your person making soap in their basement. These types of things instead of these big conglomerates.

With much of the groundwork completed as part of researching the program, Church said she expects the program to be up and running around February, pending approval.

To fund the program, Church suggested using a portion of the more than $39 million the city will receive spread over 2021-22 in ARPA funding. As the program helps support the city’s economy and local businesses, Church said the loan program falls within ARPA’s intended uses.

“Right now a lot of people are out of work or out of work and trying to start new businesses that they may not have thought about before, before COVID,” Church said. “I think that’s why this program is exploding so quickly. We’re in a time where unemployment is a bit higher and we’re thinking more creatively about what people want to do. “

Because the program works with small businesses, which are traditionally run by minorities and women, 81% of all Kiva lenders are women-owned businesses and 65% are minority-owned, Church said.

Kiva started in 2016 and now has 45 hubs in the United States. Before Middletown began a partnership with Kiva this year, Rochester, NY, was the closest Kiva hub, Church said.

By signing with Kiva, Norwalk becomes a “hub” for Kiva, providing access to the city’s resident and business loan database. To become a hub, the city will pay a fee of $65,000 for the three-year deal.

As part of the agreement, the city will provide a staff member to act as a capital access manager to help Norwalkers build their loan profile on the Kiva database and connect small businesses with new businesses. other financial resources and aid in the region.

Once the staff member is trained, the hub can officially open and local businesses can start applying for funds.

A new staff member will not be added to the city’s operating budget for the loan program, economic and community development chief Jess Vonashek said.

“He’s not someone we’re looking to add to the team full-time,” Vonashek said. “He’s someone we’re looking to contract over the three-year period of Kiva’s hub contract.”

For the capital access manager, the city will pay an additional $245,000 over the three-year term, for an annual salary of about $60,000, Church said.

The capital asset manager would likely start part-time and transition to a 40-hour workweek once the schedule resumes, Vonashek said.

“We’re talking about this small business toolkit,” Vonashek said. “This is a huge opportunity for Norwalk which may even be enough money to pay deposits to open a storefront, which we are looking forward to opening small businesses in the urban core.”

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