Greater Harrisburg's Community Magazine

Ante Up? Harrisburg debates chipping in for new revolving loan fund.

Harrisburg City Council at tonight’s work session meeting.

The Harrisburg Business Opportunity Fund hasn’t doled out its first loans yet, but its leaders already have their eyes on growth.

Last week, Impact Harrisburg, the Pennsylvania Housing Finance Authority and the Community First Fund announced the launch of a new $1 million loan fund for small businesses in the city of Harrisburg. The Harrisburg Business Opportunity Fund will grant loans ranging from $1,000 to $100,000 to working and aspiring entrepreneurs who might be overlooked by traditional lending institutions.

HBOF partners hope that Harrisburg will eventually contribute money to the initiative, but local leaders say they’re hesitant to get back into the loan business.

Harrisburg launched its own revolving loan fund in 1984 under former Mayor Steve Reed, which disbursed millions of dollars of high-risk loans to local businesses over the course of two decades. Many recipients went delinquent on payments. Current Mayor Eric Papenfuse said tonight that more than $1.5 million in city money was lost through the venture, though the city is still receiving payments from some loan recipients.

Today, $1 million from the moribund revolving loan fund sits untouched in a city account. Impact Harrisburg Executive Director Sheila Dow Ford suggested at a City Council work session tonight that some of that money could go into the Harrisburg Business Opportunity Fund.

Unlike the city’s revolving loan fund, the Harrisburg Business Opportunity Fund will be administered by an experienced loan panel and underwritten by the Community First Fund, which Dow Ford said will mitigate risk and bolster return on investment.

Papenfuse, however, said he’s wary of lending out public dollars.

“The city has a very poor history with these types of loan funds,” he said. “They’re prone to corruption and have cost us millions of dollars. I don’t know if the city’s role is taking risk with taxpayer dollars.”

What’s more, it’s not clear if the money in the revolving loan fund could be designated for any other use. Papenfuse said that there are few records from the loan fund’s inception, and some of the money may be legally bound to its original purpose with the city.

Papenfuse and Jackie Parker, the city’s director of community and economic development who also sits on the board of Impact Harrisburg, agreed that the city should wait to invest in the fund until it sees how its early loans are disbursed and if they are reaching a target population of entrepreneurs. Parker stressed that the purpose of the fund is to empower people who want to start businesses, not just entrepreneurs looking to scale up an existing venture.

“The right approach here is making sure the fund is successful in getting money in the hands of folks who really need it,” Parker said. “We would consider a potential future transfer of money, but I think it’s premature.”

Council President Wanda Williams, on the other hand, called on the city to chip in to the new fund. She argued that if Harrisburg allows developers to build high-rent apartments and office space in the city’s downtown business district, it should find a way to empower small business owners.

“We have developers coming in and renovating buildings into high-rent places people cannot afford – why not look at small businesses?” Williams said. “We need to release some of that money.”

Papenfuse said that Impact Harrisburg has not formally invited the city to contribute to the fund, but he would consider a partnership after seeing how the first round of loans are distributed.

But he’s also in favor of pursuing other options, such as neighborhood-based business incubators, as a way to help entrepreneurs.

“There are potentially lots of ways to invest in small businesses,” Papenfuse said. “This [loan fund] is just one option on the table.”

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