What is a Revolving Loan Fund?
Revolving loan funds are pools of money used to makes loans for development and small business expansion. A loan from a loan fund can serve as a bridge between the amount the borrower can borrow from a private lender, such as a bank, and the amount needed to start or expand a business or development project. Loan funds are usually established using money from both public and private sources. As loans are repaid to the loan fund, new loans can be issued to other businesses. The DEGC administers several different loan funds, as described below. Each loan fund has certain application and performance requirements.
DEGC Loan Fund
Detroit Industrial Revolving Loan Fund (DIRLF)
DIRLF is a citywide program for fixed-asset financing, which is administered by the DEGC. Applications are evaluated by the DEGC based upon the proposed borrower’s ability to repay and the potential impact of the proposed project on Detroit’s economy. DIRLF funds may be used for up to 40 percent of the costs of an eligible project, to a maximum of $200,000. The remaining 60 percent may be provided by a private lender, the borrower — or both. The borrower may be required to pledge certain assets not connected with the project and/or personal assets. The loan term(s) may vary, but in no event shall the term(s) exceed the useful life of the financed asset. The borrower shall also reimburse the DEGC for all out-of-pocket expenses, including but not limited to legal costs, recording fees and filing fees.
Downtown Development Authority (DDA) Loan Funds
SMALL BUSINESS LOAN TRANSACTION PROGRAM
HOUSING/ OFFICE/ RETAIL DEVELOPMENT PROGRAM
The Housing/Office/Retail Development Program was established by the City of Detroit’s Downtown Development Authority (DDA) to stimulate additional residential and commercial activities in the Downtown District. This revolving loan program provides funds for the construction, redevelopment or improvement of real property located within the Downtown Development Area No. 1. To qualify for this program, an applicant must be either the property owner or — for certain cases — the tenant in a building located in the Downtown Development Area No. 1. Loans issued under this program supplement private investment and generally require at least a 2:1 ratio of private to public funds. The actual terms and conditions of the loan will be negotiated on a project-by-project basis.
Economic Development Corporation (EDC) Loan Funds
RESIDENTS/ REAL ESTATE
The Residents/Real Estate loan fund was established by the EDC to foster greater investment in the real property rehabilitation projects by City of Detroit residents. All Resident/Real Estate loans are limited to real property rehabilitation projects to be owned, operated and financed by City of Detroit residents. City of Detroit resident ownership is defined as a minimum of 60-percent ownership belonging to a resident with a minimum of two years of residency within the City of Detroit. These loans are limited to a maximum of $750,000 or 40-percent of project costs, whichever is less. All loans are subject to standard credit underwriting as specifically detailed in the EDC’s Credit Policy Manual.
NATIONAL/ REGIONAL RETAIL/ RESTAURANT
The National/Regional/ Retail/Restaurant Loan Fund was established by the EDC to help foster investment in national or regionally recognized retail and restaurant ventures. Loans are limited to a maximum amount of $500,000 or 40-percent of project costs, whichever is less. All loans are subject to standard credit underwriting as specifically detailed in the EDC’s Credit Policy Manual.
NON-AFFILIATED RETAIL/ RESTAURANT
The Non-Affiliated Retail/Restaurant Program was established by the EDC to foster investment in fill-in ground floor retail/restaurant ventures. Loans are limited to a maximum of $200,000 or 40 percent of project costs, whichever is less. All loans are subject to standard credit underwriting as specifically detailed in the EDC’s Credit Policy Manual.
In order to qualify, borrowers must be able to prove ownership or demonstrated management responsibility for similar ventures. They must also have a valid license/operating agreement for the proposed venture, as well as demonstrated financial capacity to complete build-out and provide necessary operating capital for a minimum of one year.
Located on the eastside of Detroit, J&G Pallets received a $200,000 loan from the DEGC, which helped make its growth possible. With this loan, along with assistance from LISC and Invest Detroit, the company purchased materials to help rebuild the facility and new equipment. The result: J&G Pallets was able to accelerate its growth plan, cutting the timeline to completely renovate its facility by more than five years.
Since 1992, J&G Pallets has been providing pallets and pallet transportation solutions to local customers. Located five minutes from Eastern Market, Downtown Detroit and two major automotive plants, J&G Pallets is a resource for all manufacturers and warehouses in Metro-Detroit. With an emphasis on affordable rates, local hiring and family values, J&G has grown from a home-based business, to employing upwards of 20 members of the community, including returning citizens and individuals with cognitive disabilities. DEGC is proud to support businesses like J&G Pallets with a desire to grow and hire locally, and invest in city.
Mini Mowgli is thankful to DEGC for helping bring The Congregation Detroit to life. He received a $192,000 DIRLF loan from the DEGC to help turn a 2,500 sq.-ft. church into a coffee house and neighborhood gathering place. The project also received support from Michigan Women Forward and won a $40,000 grant through the Motor City Match program. After three years of hard work The Congregation Detroit is the focal point for neighbors to gather, drink, eat, and listen/see some great artists – even enjoy Saturday morning yoga. The business is expected to employ up to 25 local residents, mostly part time. The former 1920s-era church, located on Rosa Parks near the Boston Edison neighborhood across from Gordon Park, will offer coffee and pastries in the morning and offer cocktails and light fare in the evenings. It is also available to rent for events. The building was last used in 2014.
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Responsive DEGC Grants and Loans
The DEGC administers grants and forgivable loan programs to grow small businesses and help those facing hardship.
in Zero-Interest Loans
August 2019: DEGC, through the Economic Development Corporation of the City of Detroit and in partnership with the City of Detroit and various lending institutions, created a zero-interest loan program for businesses impacted by construction along the Livernois commercial corridor. This financial tool provided flexible capital to qualifying small businesses located in the Livernois streetscape improvement area between 8 Mile Rd. and Margareta Ave. During the program, the DEGC provided loans to 23 businesses totaling more than $400,000. The program gave financial stability to businesses experiencing reduced revenues during the construction period.
March 2020: DEGC, in collaboration with the Michigan Economic Development Corporation, Wayne County and the City of Detroit, announced a grant program to help Detroit small businesses survive the economic impact of the COVID-19 crisis. Through the Michigan Small Business Relief Program, DEGC administered $1.6 million to small businesses throughout the area. With the help of City Council, another $2.4 million was added to specifically support Detroit businesses facing drastic reductions in cash flow as a result of COVID-19. More than 730 businesses received grants from the $4 million program.
to Minority-, Woman- and Veteran-owned Businesses
July 2020: A second small business grant fund was launched to further help small businesses suffering the economic impact of the COVID crisis. DEGC, through the Michigan Small Business Restart Program, administered $7.25 million in grants to those businesses with fewer than 50 employees in an industry that has been affected by the COVID-19 crisis. Both for-profit and non-profit businesses with demonstrated COVID-related income loss and need for working capital were eligible. Through this second grant program, businesses could receive up to $20,000 to pay regularly occurring business expenses such as payroll, rent and utilities. A minimum of 30 percent of the money from this fund was directed to minority-, woman- and veteran-owned businesses.