The following story ran in The Sun on 6/2/2000:
Seeding Downtown Business
Loan program helps new ventures get over initial hurdles
By MICHAEL O'CONNELL
Sun Staff
New downtown restaurants such as this pictorial representation are among the businesses that can take advantage of a new loan program in Lowell.
LOWELL -- Anna Jabar didn't need funds from a city-backed loan program to build her LaBoniche bistro into one of downtown Lowell's culinary showpieces.
She turned to a supportive landlord and an activist banker when she needed help getting her venture past the balky start-up stage that virtually all restaurants seem to go through.
But Jabar realizes that most new restaurants need whatever help they can get -- and that's why she's thrilled to hear that Lowell's city government has created a new financing vehicle to help ventures like hers get off the ground.
"I think it's great," said Jabar, who started LaBoniche on Gorham Street in 1988 and moved it to Merrimack Street in 1995. "It will certainly make it more attractive for people to take a risk downtown."
The so-called Downtown Venture Fund, organized by the city's Division of Planning and Development (DPD), is designed to provide loans of up to $200,000 apiece to restaurants and retailers that are looking to locate or expand in the downtown area.
The fund currently has $900,000 in seed money -- $300,000 each from the city, the Lowell Development and Financial Corp. and a coalition of eight banks and credit unions. The city council approved the third chunk of money Tuesday night.
The loan pool is expected to grow. The LDFC says it's close to gaining a commitment for an out-of-town investor to kick in at least another $100,000, and plans call for the same groups to boost the fund up over $1.5 million by mid-2001.
That should be enough to attract at least a handful of high-quality businesses to the downtown area that might have gone elsewhere without the venture loans, according to Assistant City Manager Matthew Coggins, who took a lead role in assembling the program.
"I think it's going to make downtown Lowell a far more attractive opportunity than downtown Nashua, downtown Haverhill or downtown anywhere," Coggins, the head of the DPD, said in an interview this week. "I have yet to see any other community step up to the plate with a program like this."
The fund offers loans structured to give start-up businesses relief in the early years, when sales are low and cash flow is tight. The thinking is that if a business can just get over its toughest early hurdles, it will stabilize and give the lender a better chance of a full return on its investment.
For instance, a typical bank loan might require a new restaurant or retailer to put up a 20 percent equity stake, make monthly payments right away and pay off the whole loan in 10 years. The Venture Fund might structure the same loan requirement differently, requiring a 10 percent equity stake, deferring all payments in the first year and spreading out the payments over 20 years -- at a lower interest rate.
Gerard Brandi, president of Massbank for Savings of Reading, describes the program simply as good business.
"The downtown is important to the city and the city is important to our franchise up there," said Brandi, whose bank has branches throughout Greater Lowell. "It's important to everybody. It's a win-win if it's done right."
Massbank is one of several banks that essentially have a double interest in the program. The bank belongs to the LDFC, the group that kicked in a third of the funding and will manage the loan fund. And Massbank also agreed to commit roughly $75,000 of its own cash in two annual installments.
Also participating are Enterprise Bank, the Lowell Five Cent Savings Bank, the Lowell Cooperative Bank, Washington Savings Bank, Butler Bank and the Jeanne D'Arc Credit Union, all of Lowell, and FirstMass Bank, the former Family Bank.
LDFC President James Cook said he hopes to recruit other area financial institutions to the coalition.
The program is generally aimed at new businesses looking to locate in the downtown area. But Coggins said the LDFC, which will administer the fund, will evaluate applications from new businesses that pick sites just outside the downtown and existing businesses that plan significant expansion.
How well the program will work will depend largely on the types of prospects that apply.
Peter Christie, executive vice president of the Massachusetts Restaurant Association, said he thinks it could really help the city jump-start its retail and restaurant recruitment effort.
"I think it shows some really forward thinking on (government leaders') part," he said. "For someone to find a new location to put their business, it's a huge investment to come in. Something like this shows the community is willing to invest in them as well."
The program is too new for anybody to have filed an actual loan application, but it is starting to draw interest. Real estate agent William Taupier, who represents several building owners in the downtown area, said he has three clients currently looking at sites that hope to take advantage of the financing package.
"I would be surprised if they didn't have to expand the program before too long," he said.
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