Private Investment
Private corporate investment and support from private foundations are supplemental
resources that can be used prior to SID formation, during SID administration, as well as
independent of a SID. The Prudential Foundation has helped many neighborhoods throughout
Newark to develop both physical and educational improvement programs. Other potential
investors in West Side Park are Blue Cross/Blue Shield and Seton Hall University's Law
School. When utilizing private investment, it is important to pursue as many avenues as
possible.
The City of Salem, a community with a high crime rate and a large percentage of vacancies,
has utilized the efforts of the town's private sector in order to rejuvenate. "Stand
Up for Salem" is sponsored by local businessman John B. Campbell, Chairman of
Mannington Mills Inc. Instead of using city government, Campbell has drummed up support
from larger nearby corporations which utilize Salem residents for their workforce.
PSE& G, the DuPont Company, and Atlantic Electric have pledged both money and
managerial talent to the campaign. The community raised over $120,000 per year in order to
develop a revitalization plan that includes the establishment of a satellite office of the
community college in the downtown to make it more accessible to residents (Romano, 1989).
Many similar programs can be started and similar sources tapped into to further the
Springfield and South Orange Avenue community at large.
Loan Pools & Loan Programs
The initial survey of the business owners in West Side Park indicated that a majority
utilize the banking services provided by First Union. First Union as well as other major
financial institutions, foundations, and private enterprises participate in loan pools. A
loan pool is a source of funds accessible to private individuals that gives financing for
building rehabilitation, startup costs, expansion, etc. for their respective businesses.
These pools offer reduced rate loans for businesses that have been previously turned down
by banks when trying to qualify for the loan. Typically a municipality will either provide
the necessary funds to guarantee the loans, or will contribute a source of funds to the
financial institution administering the loans so that the loans are given at a reduced
rate (Barnes, 1998).
The first step for developing a loan pool is to form a coalition. The municipality or
community-based organization usually spearheads this process. The coalition is made up of
the municipality/CDC representative, local and or regional banks, foundations, or private
investors - those who want to participate in the lending process. This committee should
include merchant representation to ensure that the needs of local businesspeople are
coordinated with the loan terms and will best accommodate those seeking the funding.
Merchant representation on such a committee is crucial in that loan pools have a difficult
time spreading the word and 'enticing' merchant participation. The businesspeople that
serve on the committee, because of their familiarity with the community, are in a better
position to market these loan programs to area merchants.
Loans can be administered several ways. In some cases the municipality or community
development corporation, if guaranteeing the loan, will be responsible for qualifying the
individuals. Based on the qualifying information, the committee will then vote on whether
the individual should be approved for the loan. Sometimes the CDC or municipality
administers the loan, but most typically the money from all committee members is put into
a pot and the loans are administered by one of the financial institutions. There are often
several banks at the table that take turns administering and monitoring the loans on a
rotating basis. The Greater Newark Coalition does all the paperwork and then submits the
application to the committee for approval- in essence acting as a middleman between those
applying for the loan and the bank lending the money. Typical loans can range from $10,000
- $15,000.
Unfortunately, the paperwork required by a loan pool thwarts participation. The financial
disclosure statements and necessary qualification factors required by lending institutions
are intimidating to many small business owners. While wealthier municipalities are able to
'sponsor' more money and keep loan pool interest rates low, communities in need often have
higher interest rates- less funds contributed- and have more difficulty qualifying.
Perhaps the city of Newark could contribute either Community Development Block Grant or
Urban Enterprise Zone monies as well as capital funds to subsidize the loan pool and to
allow greater accessibility to the program. A community development corporation employee
may also be able to help businesses to overcome the paperwork. A serious marketing program
that informs business owners about the filing process as well as loan pool advertisements
is an essential element.
Factors of a Successful Loan Program
- Initiative. The local business community has to make a concerted effort to
approach the bank.
- Marketing. In the past, loan pools have failed despite even the best financial
packages put together because people simple did not know they were available.
- The businesses need to feel confident that their area will rebound and the investment
will not contribute to a losing battle.
