MANKATO — Funding offered by the city of Mankato to small businesses weakened by the COVID-19 economic disruption hasn’t run out yet, but the City Council will be asked Monday night to boost the amount by 15%.
The low-interest loan programs authorized last month resulted in eligible businesses requesting $269,000 of the $340,000 originally available. City Manager Pat Hentges is recommending adding another $50,000 to the pot.
The city received 21 applications totaling $104,000 for its Sustaining Loan Program, which provides up to $5,000 to small businesses to cover overhead costs incurred due to the state-ordered closings aimed at slowing the spread of the coronavirus. The council, acting as the Mankato Economic Development Authority, had provided $140,000 for that program, and Hentges is requesting that the full amount continue to be set aside in case additional late-arriving applications still arrive by mail.
Applicants ranged from ice cream shops to bars to fitness centers and were seeking loans most commonly to cover rent, property taxes and utility bills.
The larger Recovery Loan Program offers up to $25,000 to help businesses reopen in the changed economy brought about by the pandemic. The loans can be used for building retrofits — such as adding drive-thru service — purchasing supplies and inventory needed to resume services after weeks of closure, or buying specialized equipment, including masks, gloves and cleaning equipment necessary to meet the pandemic guidelines of the Centers for Disease Control and Prevention.
To date, eight applications totaling $165,000 have been submitted for Recovery Loans out of $200,000 approved by the council, which will be asked to boost that fund to $250,000. Most applicants were owners of bars and restaurants.
The council, when approving the programs, worried that demand would quickly exceed supply, wondering if a lottery or some other method would be required to decide which businesses would receive loans.
But owners of many small businesses are increasingly uncomfortable taking on more debt, no matter how low the interest rate, Tim Tupy told The Free Press in an earlier interview. Tupy, who with his wife, Tami, owns the Mankato Brewery and Liv Aveda Salon, has spoken to owners of many of the bars and restaurants that typically purchase much of the brewery’s output.
“They’re not looking for more loans, I can tell you that,” he said.
The funding for Mankato’s loan programs is coming from the EDA’s revolving loan fund, which totals more than $1.8 million.
The loans were targeted at businesses that have lost 50% or more of their typical revenue due to the pandemic and have 50 or fewer employees.
For the Sustaining Loan Program, the interest rate is 0% and no loan payments would be required until one year after the business is able to reopen. After that interest-free deferral period, the interest rate is 2% and the loan would not have to be fully repaid for two years. The Recovery Loan Program carries the same terms other than the length of the loan, which is five years.