The city of Statesboro recently created a loan program for up to $1 million, in cooperation with Carver State Bank, which is based in Savannah, to assist small businesses in Statesboro impacted by the COVID-19 pandemic downturn.
City Council on May 19 unanimously approved a loan loss reserve fund of $250,000, which is the maximum amount the city is putting at risk in loan guarantees of up to $25,000 to any individual business. The council then on June 2, on a motion from District 3 Councilwoman Venus Mack seconded by District 2 Councilwoman Paulette Chavers, unanimously approved the agreement with Carver State Bank, which under terms of the agreement could make loans adding up to $1 million with the partial city backing.
“The goal of this partnership with Carver State Bank is to help small businesses in Statesboro qualify for loans,” Statesboro Mayor Jonathan McCollar said in a June 3 press release. “The past three months have been exceptionally difficult for local small business owners with government assistance drying up and many banks not approving small business loans due to the uncertainty of the economic impact of COVID-19. We are grateful that Carver State Bank has taken a chance on Statesboro, and we look forward to healing and growing our local economy with their assistance.”
City $250K backing
The program is called the Statesboro Small Business Recovery Fund. Officials noted that the city’s $250,000 commitment is funded from reserves of the city’s enterprise budgets, specifically water and sewer and natural gas, and not from the general fund property tax levy.
“My reading is, they can loan (a business) as much as they want to, but we’re only on the hook for $25,000,” District 5 Councilwoman Shari Barr said during the June 2 discussion.
“That’s correct,” said City Manager Charles Penny. “They (Carver State Bank officials) have to establish the risk, but for our purposes with that loan loss reserve, our greatest exposure is $25,000 … per one individual business. But they could loan someone $50,000, they could loan them $100,000, and the advantage with this group is, there are some other funds that are available from the state that they’re able to leverage.”
Actually, with funds from other sources not limited by the city-guaranteed loan agreement, Carver State Bank could make loans exceeding the $1 million total to Statesboro businesses, Penny said. In this regard, City Attorney Cain Smith noted that a section of the agreement allowed that the bank to “make additional capital available” to borrowers.
Carver a CDFI
As Penny noted, Carver State Bank is certified as a Community Development Financial Institution, or CDFI. These lenders participate in the federal CDFI Fund program, administered by the U.S. Treasury Department, to assist businesses and promote job growth in financially distressed communities.
Council members also asked about a section of the agreement allowing the city government to prescreen applicants to ensure that they do not have “longstanding issues with payment of ad valorem taxes, utilities and/or occupational taxes.” Smith said this amounted to a “good faith” provision.
Penny said any information the city uses would be about longstanding, past payment issues and not any arising from the COVID-19 pandemic.
“If we’ve had some businesses that have had some issues surrounding the pandemic and weren’t able to pay, that’s one thing, but we’re talking longstanding history and we have to respect the confidentiality of the business folks, but I know the council wants us to make sure we are not exposing ourselves needlessly,” he said.
Under the agreement, the city’s involvement in guaranteeing any loans is limited to 48 months.
Penny said the current program could lead to further cooperation between Statesboro’s city government and Carver State Bank in the future.
“This is the result of a pandemic, but you may want to look at this for other opportunities for small businesses in the community because, again, this bank is a CDFI, and they’re looking for opportunities to help grow small businesses in our community,” he told the mayor and council.
Local banks asked
District 1 Councilman Phil Boyum asked if the request had been put out to other banks in the Statesboro and the region for proposals.
“What we did is we coordinated a conference call through the Chamber of Commerce with local banks, and on that call, to all the local banks that participated in that call, we laid out the vision of what we wanted to do with the loan loss reserve, and during that call we did not have a commitment from any bank at that time,” McCollar said.
The city also sent the initial proposal request, through the Chamber, to local banks and followed up with Synovus, Renasant Bank, Wells Fargo and Morris Bank, he said. CORE Credit Union had indicated they were barred from participating, and only Morris Bank expressed a willingness to participate in the city-guaranteed program, but only at a 100% guarantee, limiting the program to $250,000, the mayor said.
He then called on Carver State Bank as a CDFI, he said.
Several council members said they are surprised that no local banks stepped up.
“These are citizens of Statesboro and no bank in Statesboro, Georgia, would take a risk on the people that live here? We had to go outside to find a bank to take a risk on them, and all of the banks know what is transpiring here. I have no excuse for them,” Chavers said June 2. “There’s no excuse, no excuse, just no excuse, and that burdens my heart. .... ”
Mack said, “It’s ridiculous to know that they didn’t care about small business owners.”