Whether you’re a shop owner looking to expand your storefront or an aspiring entrepreneur with a business dream, you may benefit from a new loan fund set to launch this month in Harrisburg.
Impact Harrisburg is partnering with the Community First Fund and the Pennsylvania Housing Finance Agency to launch the Harrisburg Business Opportunity Fund (HBOF) on March 20 with $1 million in seed money, according to Sheila Dow Ford, executive director of Impact Harrisburg.
Impact Harrisburg, which was founded with proceeds from the sale of Harrisburg’s incinerator, will contribute $350,000 to the fund. The Pennsylvania Housing and Financing Authority has pledged $650,000 through its nonprofit subsidiary, the Commonwealth Cornerstone Group.
Loans will be available to small, for-profit business owners or aspiring business owners in amounts ranging from $1,000 to $100,000. According to Dow Ford, the goal of the fund is to encourage economic development, job creation and a diverse workforce in the city of Harrisburg.
“We’re providing for a segment of the population that has, for various reasons, been overlooked by traditional lending institutions,” Dow Ford said. “We want to create opportunities to build business and put people on the tax rolls.”
Any for-profit business or startup in Harrisburg can apply for a loan, Dow Ford said. Real estate trusts or businesses that buy and sell property will not be eligible.
The new fund bears some resemblance to Harrisburg’s old revolving loan fund, which was launched in 1984 and languished in the 2000s as many borrowers went delinquent. As of 2015, businesses that received loans from that fund still collectively owed $1.1 million in past due payments, TheBurg has reported.
Dow Ford acknowledged that some HBOF loans might be considered risky by traditional lending standards, since they will be issued to people and ventures that might be denied by traditional lenders. However, she hopes that the partnership with CFF will prevent the same mismanagement and delinquency that plagued the city’s revolving loan fund.
CFF’s loan panel will apply its standard protocol for reviewing applications, disbursing monies and tracking return on investment. The Lancaster-based organization, which has provided capital to entrepreneurs in central Pennsylvania for 25 years, is working with Impact Harrisburg to solidify loan terms and criteria before the fund launches next week.
“We’ve identified criteria in line with the way we’ve always made loans,” said Joan Broadhead, executive vice president and chief operating officer of CFF. “But we’ve agreed to a few different areas of flexibility that we hope will encourage more entrepreneurs, especially entrepreneurs of color, to access loans.”
Dow Ford said that the Harrisburg Business Opportunity Fund will offer flexible underwriting and a 5 percent interest rate for its loans, which she said is lower than interest at a bank or other lending institution.
Impact Harrisburg will receive regular reports from CFF and internally track all the loans, Dow Ford said, but otherwise will not participate in the selection process.
Dow Ford said that the fund is also distinct because it offers microlending – small, short-term loans with low interest rates. In addition, monies from the Harrisburg Business Opportunity Fund will be available to entrepreneurs at any stage of business development.
“We want to put in place tools to help businesses succeed, from beginning to end,” said Brian Hudson, executive director of PHFA. “That could be for a business that’s struggling to find the capital to grow, or for a business that’s just getting off the ground.”
Impact Harrisburg, PHFA and CFF plan to work with local partners, including Harrisburg Young Professionals, CREDC and M&T Bank, to create a “toolbox” of business resources and offer expertise to loan recipients, Dow Ford said.
“We expect there will be some hand-holding,” Dow Ford said. “Everyone has to come in with something, but sometimes they need technical assistance or help structuring or tweaking their business plans.”
Dow Ford and Hudson hope the fund will grow in the coming years. Though PHFA will not participate in loan operations, Hudson said his main responsibility in the partnership will be identifying public and private partners to contribute capital to the fund.
“If we could get to $5 million in three to five years, that would be great,” Hudson said.
More information about the Harrisburg Business Opportunity Fund, including loan terms, criteria and application instructions, will be available on March 20.