Schumer Announces Statewide Credit for Success Program Makes First Loan to Small Business in Warren County; Loan Will Allow Business to Expand Operations, Potentially Create Jobs

Press Release

Today, U.S. Senator Charles E. Schumer announced that the innovative Credit for Success Program, which helps successful small businesses gain access to much needed capital, has made its first loan to a small business in Warren County, allowing the business to expand its operations. The first loan comes less than two months after the program came online. The small business, Martha's Dandee Crème, recently received approval for its loan after its application met rigorous SBA standards and underwent extensive vetting by the New York Business Development Corporation. Martha's will use the loan to more than triple wholesale operations, a new business the company relies on to generate cash during the Winter months. The company can also use the loan to purchase new equipment and add the necessary staff that will be required to run a year round business. Martha's was referred to the Credit for Success program when its own bank declined its initial application for a traditional loan. The bank, which is a participant in Credit for Success, decided that although it could not extend the loan itself, it would do so as part of a larger group and with the SBA guarantee available through Credit for Success. Without Credit for Success, this loan, and Martha's expansion of its wholesale business, would not be possible.

Schumer announced the statewide expansion of the Credit for Success Program in January after the program was initially introduced in Ulster County. At the time, Schumer said that the program would establish regional loan pools to be committed by local banks and money center banks, to provide a critical source of funding for local businesses seeking to grow and expand, but which have not been able to secure financing due to the continuing credit crunch that is disproportionately affecting small businesses.

Under the program, lending decisions are being made by the New York Business and Development Corporation pursuant to rigorous underwriting standards -- all loans comply with SBA lending criteria -- but the program's innovative structure enables banks to increase their small business lending. The consortium structure provides the benefits of "syndicated" lending -- i.e., risk sharing among lenders -- on a smaller scale, so that businesses that would have ready access to credit in good economic conditions, but are having trouble accessing credit in the current environment, are once again able to access much-needed capital to create jobs.

Across the state there are 33 banks that have agreed to join various regional consortiums, with several banks committing to more than one region. Currently, there are at least 4 banks in each region, along with NYBDC, and a total of $8.25 million has been pledged. The money is distributed as loans to small businesses struggling to get credit because of the massive credit crunch. The key to the program's success is getting banks to make the monetary commitments, which has already happened. Once the money is in place small businesses can begin to access it to improve and expand their small businesses -- something that is beginning to happen.

"Small businesses will be at the tip of the shovel that digs out of this down economy, but only if we can get them the resources we need, and prevent the credit crunch from strangling their efforts to expand," said Schumer. "This program gives businesses, which during normal times would have had access to credit, the tools they need to grow and continue to be the backbone of the economy and the force behind the recovery. I'm thrilled that Martha's Dandee Crème will be receiving the program's first loan and I'm confident that they will use these resources to make their strong business even stronger."

"The Credit for Success program and NYBDC have been great to work with throughout the loan process," Said Dennis Lafontaine, owner of Martha's Dandee Crème " There was significant due diligence on both parties behalf. This program is a significant help to small businesses such as Martha's Dandee Cream. Our expansion into the wholesale portion of the business will be accelerated and future job growth enhanced. My Parents, Roger and Lena Lafontaine built a very successful retail operation. I will with the proceeds from this loan be able to expand this small business into the wholesale market. This will enable us to operate year round, enabling us to hire additional employees for the Ice Cream cake and novelty portion of our business. We at Martha's are very excited about the opportunity this brings us."

Martha's Dandee Crème has been a community landmark for more than 50 years. The business started as a family owned restaurant in the 1930s and has continued its success since. Currently, the business is in the hands of its second owner, the Lafontaine family. Historically, the Lafontaine family business is opened seasonally but the loan through the Credit for Success Program will allow the business to expand its operations to year round and enable it to purchase any necessary equipment and hire any necessary staff that might be needed in the operation of a year-round business. The financing will also allow the company to expand its wholesale business into New England.

Small businesses are expected to drive the economic recovery -- historically they provide 65% of new jobs. Despite the fact that most banks serving New York continue to lend to small business, there is a clear perception that creditworthy borrowers are not able to access credit. This can harm business confidence and keep otherwise stable companies from operating at full capacity.

Schumer noted, "We're not giving money away, and not everybody will get a loan, but this program will help to ensure that deserving companies in New York at least get a second look. This first loan is a sign that Credit for Success is a worthy program that targets successful small businesses and allows them to grow."

Applications for this program are only accepted from small businesses located in a region served by the consortium. The small business must first make the loan application to and be declined by its bank of account. Additionally, the small business must agree to seek business counseling from the Small Business Development Center serving the region. The counseling must be substantially completed prior to the approval of the loan. Applicants must also meet all eligibility requirements of the SBA. The loan amounts are small -- just enough to get a business off the ground or to help it expand - not less than $25 thousand and not more than $150 thousand.

The NYBDC participation amount in each loan is the greater of 10% or two times the loan amount divided by the number of participants (including NYBDC) plus one. The NYBDC therefore has skin in the game and makes loan decisions accordingly.

For example:

- If the loan amount is $120 thousand and there are 5 consortium members in the region including NYBDC, NYBDC will participate in the loan in the amount of $40 thousand and each of the consortium members will participate for $20 thousand;

Schumer added, "This is a win-win-win: it is a win for small businesses, a win for the economy, and a win for job creation."

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