Emergency Small Business Loan Program Would Require City to Pay Interest for One Year | Jax Daily Record | Jacksonville Daily Record

VyStar Credit Union CEO Brian Wolfburg expected to sign an agreement with the city on April 1 authorizing an emergency loan program to provide working capital to small businesses affected by the COVID-19 response.

The deal requires city council approval and the signature of Jacksonville mayor Lenny Curry, but VyStar chief executive said in a telephone interview on April 1 that the program would quickly grant loans of up to 100,000. $ to eligible businesses.

Wolfburg said two VyStar executives developed the loan program in less than a week to bring the small business safety net to the local market.

VyStar had already set up a similar loan program before approaching the city to offer the public-private partnership.

“The program is an accelerated and more efficient loan option for people who need it immediately. There are a lot of great government incentives to come, but I think we all understand that part of that still has work to do, ”Wolfburg said. “People need to understand it better and it will take some time to get it into people’s hands.”

Curry announced on March 31 that the city would contribute $ 20 million to $ 30 million to the public-private partnership in the form of a combination of grants, interest payments, and potential aid to loan principals.

Wolfburg said the city will immediately give a $ 1,000 grant to businesses approved for the loan program, which is a line of credit.

Businesses can draw on this line of credit for up to six months with no payments due in the first year. The city will cover all interest payments for the first year. The repayment will start in the second year.

Businesses that meet employee retention requirements will receive additional benefits from the city’s contribution, which could include paying additional interest and supporting or remitting principal.

Wolfburg said city officials are drafting the requirements and benefits.

Curry said loan approval will take up to 72 hours after an application is submitted and businesses could receive the money within five days of the application.

The mayor said that on April 1, the city will pay for the program with reserves from the general fund in the first year. The expenses will be added to the city’s annual budget in subsequent years.

According to the city council’s auditor’s office, the city had $ 146.4 million in its reserve fund that could be made available upon council approval. The past year’s audit that would provide the balance as of Sept. 30 is not complete, according to the council’s auditor.

To be eligible, a business must be located in Duval County and have:

• Completed one year of operation.

• Completed at least one income tax return.

• Have between two and 100 employees.

Wolfburg said the city’s support gives VyStar the financial security it needs to allow smoother underwriting criteria for these loans, take on more risk and help more businesses.

Wolfburg has been hesitant to give a target credit score that applicants need to achieve, but said it could be lower than the minimum of 680-720 for VyStar’s other loan products.

Wolfburg said VyStar’s liquidity for loans would not be a problem. The credit union typically authorizes between $ 10 million and over $ 40 million in small business loans per month. The organization’s total monthly loan disbursements can range from $ 100 million to $ 200 million, he said.

The money available for loans is being supported by a reduction in auto loans and other traditional loans, Wolfburg said.

VyStar does not have a cap on the number of loans, although the city can. The credit union has historical data on the number of defaults and write-offs for its traditional small business loans and Wolfburg said there was potential for a higher percentage through the program.

He said that was in part because of the more lenient underwriting requirements and the general state of the economy. Still, the CEO stressed that VyStar management should be responsible for the assets of the members of the credit union.

“We’re not going to take a look at a business that, even before the coronavirus, was likely going to go out of business or headed in the wrong direction,” Wolfburg said. “It’s not about making bad underwriting decisions and guaranteeing losses for our members’ money. There’s always an underwriting process, we’re just more lenient with the credit score. ”

Council Chairman Scott Wilson said on March 31 that the aid package could be considered an emergency next week.

Wilson expects Council to resume its regular committee work at nearly 9 a.m. on April 6 with the agenda meeting of the Neighborhoods, Community Services, and Public Health and Safety Committee.

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