The City of Aiken's small-business revolving loan program came to an official end Friday, May 22, and issued $464,200 to businesses throughout its two-month run.
The program was met with the inquiry of over 350 business owners throughout Aiken, the majority of whom were only seeking council about federal loans and other options as the coronavirus pandemic threatened their businesses in mid-March.
"A lot of (businesses) wanted help with the (federal Paycheck Protection Program loans) ... and some didn't want to borrow money at all," said Tim O'Briant, the city's economic development director. "They wanted advice on what was available and what they could do to generate some revenue ... but everyone who was interested in a loan was able to get through the application process."
The decision to close the program came when businesses began to reopen within the past month, O'Briant said, just as the program was approaching its 61st day as specified in the emergency ordinance passed by Aiken City Council in mid-March.
With the assistance of Security Federal Bank, the Aiken Chamber of Commerce and Aiken Corp., the city was able to put together a package of $1 million to develop the program that funded loans of up to $10,000 for qualifying businesses.
Terms for the loans include an amount of $5,000 or less for one year or an amount between $5,001 and $ 10,000 for two years.
Interest and repayment of the loans will be deferred for six months after each loan is granted – but a 2% interest on the loan would accrue during that time. Repayment for the loans is set to start taking place no earlier than this fall, O'Briant said. There would be no penalty for early repayment.
The city received a total of 52 loan applications from businesses throughout the course of the program, 47 of which were approved.
The five applications that were not approved did not meet certain requirements for the program, such as not being in business long enough, O'Briant said.
"Someone may have had a good business plan ... but they've only been in business since December," O'Briant said.
The approved businesses were from all over Aiken.
The next step for the program lies in residents paying back their loans. So far, O'Briant is not expecting a high default rate, though how businesses will pay back their loans will depend on how the economy recovers during the pandemic, he said.
The original default projection was specified at 25 to 30%, which O'Briant and other city officials are hoping will be much lower.
"The people we ended up lending money to are very good business people with typically a long track record ... so we feel very confident with the business people we worked with," he said.
The funds from the $1 million package will only be utilized if a borrower defaults on the loan and does not repay the money.
Federal loans are still available for residents, though O'Briant instructs anyone who might need a loan to act fast in case federal programs, such as the Paycheck Protection Program, run out, as they did in mid-April.
"It's a complicated thing because (the federal government) put $3 billion (into the program) ... my default position would be assume that they're going to close the program and apply now."