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<br />e the need to diversify business ownership in the community by addressing <br /> extraordinary credit barriers. <br /> Mr. Sullivan said that different policies will apply to businesses which are <br /> found to have extraordinary credit barriers. These businesses would be <br /> granted flexible credit policies which would provide far-ranging relief from <br /> conventional credit criteria, including decreased requirements for equity, <br /> bank participation, and collateral for the loans. These businesses would <br /> also be offered flexible financing methods, including a higher percentage of <br /> BDF financing, smaller loans, seed capital loans to new businesses, and <br /> flexible repayment terms. Finally, loan recipients who receive financing <br /> under the extraordinary credit barrier criteria would receive ongoing <br /> technical assistance. <br /> Mr. Sullivan said the CDC also recommended the creation of a distinct pool <br /> within the BDF to fund loans for businesses with extraordinary credit <br /> barriers. The funding level would be set at $255,000--the amount currently <br /> identified for the Targeted Business Assistance Program in the Three-Year <br /> Plan, pending reprogramming requests. <br /> Ms. Ehrman asked whether members of the loan advisory committee would also <br /> receive sensitivity training. She felt that this type of training would be <br /> appropriate for committee members as well as staff. Mr. Boles thought that <br /> the CDC had intended to give sensitivity training to both groups. <br /> Mr. Green asked if those who seek loans to expand their business, rather than <br />e to start a new business, could be exempted from technical assistance and <br /> training. Mr. Sullivan said most applicants are seeking loans for expansion <br /> of their business. He explained that the CDC felt loan recipients should <br /> receive training to assist businesses in their development. This is <br /> particularly important because the loans will be granted under conditions of <br /> greater risk; the training is viewed as a means of sheltering the BDF from <br /> this increased risk. <br /> Mr. Green inquired about the interest rates on the loans granted under the <br /> extraordinary credit barrier criteria. Mr. Sullivan said that if the <br /> applicant is borrowing 25 percent or less of the funds that he/she needs, the <br /> interest rate will be 6 percent. If the applicant is borrowing more than 25 <br /> percent, the interest rate will be 10 percent. Mr. Sullivan said that HUD <br /> has informed staff that its interest rate should be based on the ability of <br /> the business to pay, rather than on a fixed rate. He said that staff will <br /> begin working on restructuring the City's interest-rate policy soon. <br /> Mr. Bennett thought that expansion of the loan advisory committee membership <br /> is a good idea, but that the criteria for loan approval should not be <br /> changed. Mr. Bennett said that if the committee is expanded to include more <br /> representative membership, then it should not be necessary to change the loan <br /> criteria. Mr. Sullivan explained that the only criteria that will change are <br /> the preference criteria; these criteria will be expanded to include an <br /> analysis of whether the applicant faces extraordinary credit barriers. Mr. <br />e MINUTES--City Council-- June 26, 1989 Page 2 <br /> Dinner/Work Session <br />