In a recent posting, Michael Hohmann maintains that MCDA small business loan programs are a form of "subprime" lending that uses tax dollars to complete with commercial subprime lenders.
In fact, the MCDA programs do not constitute subprime lending. Rather, they provide capital access for neighborhood-based small businesses that may lack an established track record or a large enough down payment to obtain the financing they need. The MCDA programs, moreover, do not rely on the direct use of local tax dollars. Administrative costs are covered through the fees paid by private organizations that make use of federally-tax exempt Industrial Revenue Bond financing. Loan dollars for MCDA's real estate and operating loan programs come from local banks and a private secondary market operated by the national non-profit community development organization. MCDA does provide some limited backing for these loans through the use of loan guaranties, but its loss rate on guarantied loans has been minimal-- this year just over $21,000 for an insured portfolio of $3.4 million. . In 2002, MCDA loan guaranties helped funnel $5.4 million in private investments into commercial revitalization projects on East Lake Street, East Franklin , West Broadway, Central Avenue and other inner-city target areas. Not a bad return on a public investment of $21,000. Iric Nathanson MCDA Project Coordinator Longfellow resident _______________________________________ Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[EMAIL PROTECTED] Subscribe, Unsubscribe, Digest, and more: http://e-democracy.org/mpls
