More than 1,000 small businesses have been awarded loans totaling more than $85 million through a city fund that was met with huge demand when it was announced last year, according to an announcement shared exclusively with Crain’s.
Created in January 2023, the Small Business Opportunity Fund was aimed at giving a boost to enterprises that had struggled to receive pandemic aid or support from traditional banks. It was funded through a partnership between the city, the Mastercard Center for Inclusive Growth and Goldman Sachs, in what officials called the city’s largest ever public-private partnership directed at small businesses.
Now, the fund is wrapping up after giving low-interest loans between $2,000 and $250,000 to a total of 1,046 businesses. The number of awardees is smaller than the 1,500 winners that were initially projected because the average award value of $80,000 was more generous than officials had anticipated, said Kevin Kim, commissioner of the city’s Small Business Services Department.
“We had estimated that more businesses might come in asking for smaller amounts,” Kim said in an interview. “But because of the pandemic, because of the businesses that were wanting to grow really fast, needing a little bit of extra capital, it reduced the number [of awardees].”
The loan fund initially contained $75 million but the city expanded it to $85 million thanks to additional help from Goldman Sachs, Kim said. The bank’s initial investment in the fund was $50 million.
More than 10,500 small businesses applied to the loan fund after it opened last year, prompting the city to stop taking new applications after just three weeks. Loans were given out on a rolling basis over the past year. (A total of 15,000 businesses expressed interest in applying.)
About 80% of the loans went to minority- and women-owned businesses — meeting a key policy goal of the Adams administration, which has had mixed success in boosting opportunities for MWBEs. Business owners used the loans to hire new staff, expand into new storefronts and refinance existing high-interest debt, according to SBS.
The loans came with a fixed interest rate of 4%, which is below the market rate. The city distributed the money by partnering with eight community development financial institutions, which also contributed money to the fund.
Among the recipients was Sarina Prasabi, co-founder of Buunni Coffee, an Ethiopian roaster with four cafes in Upper Manhattan. Prasabi said her $100,000 loan, although less than the $250,000 she had sought, gave Buunni the financial security it needed to move forward on a long-held plan to open its own coffee roastery in the Bronx this spring.
“The way it’s set up, it’s very favorable to small businesses and there isn’t a lot of funding out there like this,” Prasabi said. “It gave us the confidence to secure the lease.”
Once open, the Bronx roasting plant will shorten the daily trip that Buunni employees are making from their existing roaster in Brooklyn. Buunni will also open up its roastery for use by other small coffee companies, Prasabi said.
Other recipients included the restaurateur Jae Lee, who used a $250,000 loan to expand his East Village Korean restaurant Nowon to a second location in Bushwick. The owner of Woodside’s Green Tara Market increased his supermarket’s inventory with a $100,000 loan, and the owner of Staten Island spa Chi Aesthetics added staff through her $100,000 loan.
“These loans, at the end of the day, are not just dollar signs but real investment in people and neighborhoods,” Kim said.
The loan fund was a one-time event and no program stands ready to immediately replace it, although city officials urge small businesses to use the online Funds Finder website that serves as a one-stop listing for city, state and federal grant and loan programs.
Kim said the city is in talks with other businesses that have expressed interest in funding similar small-business aid programs.
“We would love as many partners as possible to come in and do the 2.0 version of this,” he said.
Nick Garber , 2024-03-11 13:58:06
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