By Stacey Fulcher
A community loan fund has been created in Ottawa that is specifically targeted at small business owners who otherwise cannot obtain a loan.
The Ottawa Community Loan Fund (OCLF) was created after the Ottawa Economic Development Corp. made a request to the regional government for a fund. The request was granted four months ago and the fund’s regional director Brenda Richardson is currently tying up a few loose ends before the OCLF begins accepting applications.
“The OCLF is designed to support individuals who can’t access credit from banks, whether it’s because they don’t have equity or a credit history,” says Richardson. To clarify how the loan can be used, she uses this example:
“There is a man who does duct cleaning for commercial kitchens. Everyday he rents his equipment because he can’t afford to buy it. If he was able to obtain a loan, he would be able to buy the equipment and make more of a profit. The loan fund is perfect for him.”
Richardson says a full review of the person and the business plan must be completed before a loan can be approved.
The fund relies on donations and loans from the community in order to raise capital. The Royal Bank has loaned the OCLF $100,000 to get them started and has donated temporary office space on Sparks Street.
“After researching and reading, I realized that Ottawa should have this fund. They are working in other cities like Edmonton and Montreal,” says Ed Hartwik, manager of small to medium enterprises for Royal Bank. “By gathering money at a low cost, mostly through donations, the loan fund is able to really give back to the community. There is a need for this in the community. People need access to money in order to build capital.”
“The concept is simple,” says Richardson. “It is a pool of money from different sources that we lend out to people who are starting or expanding organizations.”
The loans will range from $1000 to $15,000 at an interest rate of three to seven per cent, which is slightly higher than the average rate on a bank loan. The OCLF’s interest rate is expected to go down, though, as more donations come in. Richardson says the OCLF is expecting to grant 380 loans totaling over $1.9 million by the end of 2005.
She says the fund will begin accepting applications in November, but the formal launch will not be until early 2001.
“The success of this fund is largely based on support from local community organizations, individuals, and corporations,” says Richardson. “The community gets involved but it gives back to the community as well, I think this is a win-win situation on a lot of levels.”