Schumer: Cap Region Small Businesses Struggling to Receive Credit Will Now Get Second Chance Through "Credit for Success Program" - Helps Strong Businesses to Succeed in Times of Tight Credit

Press Release

Today, U.S. Senator Charles E. Schumer announced that small businesses now have the opportunity to take advantage of pools of credit that can help their already successful small businesses gain access to much needed capital. The program, Credit for Success, establishes regional loan pools that are committed by local banks to provide critical 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. During an appearance at a local small business that has benefited from access to credit, Schumer encouraged small businesses in the Capital Region to take advantage of the program. Currently, banks across the state have committed $8.25 million to the program, and recently the program made its first loan that will help a Queensbury small business expand operations, purchase equipment and potentially add staff. In the Capital Region alone, which includes Albany, Columbia, Fulton, Greene, Montgomery, Rensselaer, Saratoga, Schenectady, Schoharie and Warren, there is $1.6 million available to small businesses from a coalition of 12 different banks.

"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 they 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."

Today, Schumer stood at Bombers Burrito Bar in Albany, a business that has greatly benefitted from access to credit and knows the benefits of such access for small businesses throughout the region. During his appearance, Schumer was joined by Matt Baumgartner, owner of Bombers and other small businesses in the region; Pat MacKrell a founder of the program and head of the New York Business Development Corporation; Dennis LaFontaine, owner of Martha's Dandee Crème and recipient of the first Credit for Success loan; Gina Grogan of Northeastern Home Enterprise, a small business in Ballston Spa that is currently applying for a Credit for Success -- Second Chance loan; and other business and community leaders.

The program, Credit for Success, establishes regional loan pools that are committed by local banks to provide critical 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. Lending decisions are made by the New York Business Development Corporation pursuant to rigorous underwriting standards -- all loans have to comply with SBA lending criteria -- but the program's structure will enable 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, will once again be able to access much-needed capital to create jobs.

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.

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.

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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