CUED

Business Credit Needs Analysis for the South Suburban Communities of City of Harvey and Villages of Dixmoor, Ford Heights, Phoenix and Robbins

Data on the supply and demand for business credit have been analyzed in this study. These include interviews and meetings with representatives from businesses, public and private financial institutions, and technical assistance providers, and reports and other documents that pertain to the availability of capital and credit in the southern suburbs for business purposes.

The primary objective of this analysis is to inform strategic planning efforts by the county and the municipalities as they seek to expand job creation and employment opportunities for the residents of these five communities by enhancing the overall business environment.

The analysis of the supply of business credit and demand for business credit indicates that gaps do exist. Only five of the thirteen private sector lending institutions that consider the five communities within their service area have been "active" in financing retail businesses there. Among these five, none are enthusiastic about financing business start-ups, nor do they aggressively market their availability to finance business requests that are below $50,000. They explain these practices by citing the high failure rates of start-up businesses and the relatively high staff costs to the financial institutions of processing and monitoring loans below $100,000.

On the demand side, target area businesses stressed that loans in the amount of $50,000 or below are what they need for short term working capital and equipment purchases. However, many of them noted that most lenders require that a business demonstrate several years of successful operation and that they present detailed financial records as documentation. The small business owners admit that their record-keeping systems are frequently inadequate and that they are "overwhelmed" by the paper work that is necessary to pursue loan requests.

While there are government programs such as the U.S. Small Business Administration Loan Guarantee and several business loan programs offered by the State of Illinois Department of Commerce and Community Affairs, both the banks and the area business owners find that it is not cost effective to invest the time and energy needed to access these programs.

On the basis of this analysis, we conclude that financial and technical assistance should be offered to the businesses and to the financing sources. This assistance should be made available through a newly established Business Assistance Center, which would be funded from a combination of CDBG money and bank fees. The pivotal staff at the Center should be one or more Loan Packagers to identify appropriate sources of public and private financing and to package the required information to access them. In addition, the county and municipalities should work with the banks to organize a loan pool to provide loans that range from $5,000-$125,000. These funds would be used to bridge the current gap between the identified supply and expressed demand related to business credit.

This website is maintained by Cedric Williams, Manager System Services,
UIC-Center for Urban Economic Development