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Council approves mutual release on small-business loan after COVID-era struggles
Summary
Parma council approved a mutual release and rescission of a $50,000 CDBG loan to Mamacitas after the business struggled through pandemic-related closures; the administration agreed to accept a lump-sum payment and rescind the remaining balance.
The City Council on Feb. 18 approved a mutual release and rescission of a community development block grant (CDBG) loan made to Mamacitas Inc. The agreement resolves an outstanding municipal loan after the restaurant operator faced financial difficulty following COVID-19 disruptions.
The Community Development director told council staff performed the usual underwriting and that the city had granted a $50,000 loan with a 10-year term and conditional forgiveness after five years of timely payments. The restaurant repaid $15,000; under the negotiated release, the borrower made a $10,000 lump-sum payment to reach a negotiated settlement level and the city agreed to rescind the remaining balance.
Council discussed why the matter came under suspension of the rules. The director said the borrower was on the verge of bankruptcy and had already sent the check and signed paperwork; the city’s CDBG program allowed low-interest business loans and the release would not harm the city’s future ability to expend those funds. The director said this is a rare instance; staff recalled a prior default about 20 years ago and said this is the second time the city has forgiven outstanding loan principal.
The ordinance authorizing the mutual release (Ordinance 27-25) passed on a council roll call. The administration said the funds in question were CDBG dollars and that the release had been negotiated to avoid further harm to the borrower and to secure payment.
