City staff say economic development loan fund is revolving and largely healthy; council seeks more data on defaults and borrower outcomes

City economic development officials on Wednesday briefed the Salt Lake City Council on the Economic Development Loan Fund, saying the revolving program is self-funded and remains active in supporting local small businesses.

"This program has existed since the early nineties," Lorena Rifford Jensen, director of economic development, told the council, tracing the fund’s origins and its role in supporting Salt Lake City businesses. Colin Gibbs, director of business development, said the fund currently has 27 active loans and that since 2011 the city dispersed 65 loans totaling about $9.5 million, of which 44 have paid off.

Staff outlined key program details: the city opens applications quarterly and caps them at 10 applicants per quarter to manage workflow; startups (defined as businesses operating less than three years) may borrow up to $100,000 and established businesses up to $350,000, with loan terms set at seven years. Gibbs said interest rates are tied to the prime rate and that by resolution the maximum rate ‘‘shall not exceed 8% points above prime,’’ with the department typically applying rate reductions for applicants meeting citywide priorities or who qualify as disadvantaged business owners.

Council members pressed staff on loan performance and borrower outcomes. Gibbs reported the department has two loans in default among the 27 active accounts and said 21 loans are in good standing. He described the city’s approach to delinquency: a 15-day grace period, outreach and technical assistance, temporary forbearance up to one year from the department, and loan committee authority for longer reamortization or payment adjustments. "We do everything in our power not to get to that point," Gibbs said of legal remedies such as small claims, repossession of collateral or other collection avenues.

Councilmember Young asked for further analysis, requesting the average length of time recipient businesses have been operating and a comparison of city loan rates with traditional financing to quantify aggregate savings for borrowers. "To me, this is one of the key parts of this solution — the fact that it's helping people stay here in the city," Young said. Staff agreed to return with the requested data.

Officials also discussed program design options, including targeted assistance for specific commercial corridors and whether refinancing private debt should be permitted. Staff said refinancing has been considered but would require additional research and safeguards because of risk and potential competitiveness with private lenders.

The briefing was informational; staff said they would provide the council with follow-up analyses on default comparisons, borrower longevity and potential program adjustments.

The council took no formal action on the loan fund during the work session.