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Jax Daily Record Wednesday, Apr. 1, 202008:20 PM EST

Emergency loan program for small businesses would have city pay interest for a year

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VyStar Credit Union would offer a line of credit up to $100,000 in the public-private partnership.
by: Mike Mendenhall Staff Writer

VyStar Credit Union CEO Brian Wolfburg expected to sign an agreement with the city April 1 authorizing an emergency loan program to provide operating capital for small businesses hit by the response to COVID-19. 

The deal needs City Council approval and Jacksonville Mayor Lenny Curry’s signature, but the VyStar chief executive said in a phone interview April 1 the program will quickly make loans of up to $100,000 available to qualifying businesses.

Wolfburg said two members of VyStar’s leadership developed the loan program in less than a week to bring the small business safety net to the local market. 

VyStar already had instituted a similar loan program before it approached the city to propose the public-private partnership.

“The program is an expedited and more efficient lending option for people who are in immediate need. There’s a lot of great government stimulus coming down the pipeline, but I think we all understand some of that still has work to be done,” Wolfburg said. “People need to understand it better and it will take some time to get it into people’s hands.”

Curry announced March 31 the city would contribute $20 million to $30 million to the public-private partnership in a combination of grants, interest payments and potential aid toward loan principals.

Wolfburg said the city immediately will provide a $1,000 grant to businesses approved for the program tied to the loan, which is a line of credit. 

Businesses can draw on that credit line for up to six months, with no payments due in the first year. The city will cover all interest payments in the first year. Repayment will begin in year two.

Businesses that meet employee retention requirements will trigger added benefits from the city contribution that could include further interest payment and principal support or forgiveness. 

Wolfburg said city officials are drafting the requirements and benefits.

Curry said loan approval will take up to 72 hours after an application is submitted and businesses could receive the money within five days of applying. 

The mayor said April 1 the city will pay for the program with general fund reserves in the first year. The expenditure will be added to the city’s annual budget in subsequent years.

According to the City Council Auditor’s Office, the city had $146.4 million in its reserve fund that could be made available by Council approval. The audit for the past fiscal year that would provide the balance as of Sept. 30 is not complete, according to the Council Auditor.

To qualify, a business must be in Duval County and have:

• Completed one year of operation.

• Completed at least one tax return.

• Have between two and 100 employees.

Wolfburg said the city backing gives VyStar the financial security to allow more lenient underwriting criteria for these loans, take on more risk and help more businesses.

Wolfburg hesitated to give a target credit score that applicants must meet, but he said it could be lower than the 680-720 minimum for VyStar’s other loan products. 

Wolfburg said VyStar’s liquidity for the loans will not be an issue. The credit union typically authorizes between $10 million and more than $40 million in small business loans per month. The organization’s total monthly loan disbursements can range from $100 million to $200 million, he said.

The money available for the loans is bolstered by a reduction in auto and other traditional lending, Wolfburg said.

VyStar is not providing a cap to the number of loans, although the city could. The credit union has historical data on the number of delinquencies and charge-offs for its traditional small business loans and Wolfburg said there’s a potential for a higher percentage through the program. 

He said that’s partially because of the more lenient underwriting requirements and the general state of the economy. Still, the CEO stressed that VyStar leadership has to be responsible with the credit union members’ assets.

“We’re not going to take a look at a company that even before the coronavirus was probably going to be closing up shop or was headed in the wrong direction,” Wolfburg said. “This is not about making bad underwriting decisions and guaranteeing losses to our members’ money. There’s still an underwriting process, we’re just being more lenient with the credit score.” 

Council President Scott Wilson said March 31 that the aid package could be considered as an emergency next week. 

Wilson expects Council to resume its regular committee work virtually at 9 a.m. April 6 with the Neighborhoods, Community Service, Public Health and Safety Committee agenda meeting.

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