Zionsville microloans open financing avenue for town’s businesses

For years, Zionsville restaurant owner Patrick Mullen worked seemingly endless hours for the princely sum of $290 a week—which he usually returned to his fledgling business to chip away at its mountain of debt.

A late 2011 move from sprawling strip mall space to the cozy Brick Street Inn downtown helped Patrick’s Kitchen and Drinks turn the corner, giving the eatery the boost it needed to begin eking out a profit.

Patrick Mullen

“We were going gangbusters,” Mullen recalled of the first six months in the new location.

Then came the fire. Investigators weren’t able to determine the cause of the small brush fire just outside the kitchen, but the effect was clear: The restaurant closed for repairs in June 2012.

Mullen and his wife, Beth Dickerson, decided to seize the opportunity (and the insurance settlement) by remodeling the undersized cooking area. Offers of assistance poured in as a month passed, then two.

“We had decided to do it ourselves,” Mullen said. “We said, ‘No, we’re fine, we’re fine.’”

But one opportunity proved too good to pass up. The town had a brand-new microloan program created to help small businesses grow and prosper.

Patrick’s scored a relatively modest $23,000 loan, but it had a big impact.

“It made it possible for us to not open up dead broke,” Mullen said.

The cash infusion—which must be used for capital improvements—freed up other money the restaurant owners used to pay off another loan. And that helped the couple refinance some onerous credit card debt, giving them some additional breathing room when Patrick's reopened in October 2012.

That’s the idea. Microloans are intended to provide startup and growing businesses an alternative to bank financing, since traditional lenders typically prefer working with more-established borrowers looking for bigger—and more profitable—loans.

Zionsville’s loan program is open to existing businesses in the town’s tax-increment financing district, which includes enterprises along its brick-lined Main Street. (Interestingly, Patrick’s would not have been eligible in its old Boone Village location.) Its $200,000 loan pool was seeded with TIF proceeds, with the potential for more.

“It’s there to increased assessed value, ultimately,” said Luke Phenicie, treasurer of the Zionsville Redevelopment Commission and its representative to the microloan committee. “If we can bring even one more business to the area, it’s worthwhile.”

Administered by the State Bank of Lizton, the microloan program is a partnership among  the town, its redevelopment commission and the Boone County Economic Development Corp., which runs a similar initiative for businesses in more rural areas.

Boone EDC Executive Director Bryan Brackemyre and Zionsville economic development chief Wayne DeLong meet with applicants to vet their business plans, then a five-member microloan committee makes recommendations to the full redevelopment commission for approval.

The low-interest loans can range from $5,000  to $25,000. Just two loans have been approved since the program debuted last year, Brackemyre said.

Zionsville’s initiative is not part of the U.S. Small Business Administration’s Microloan Program, which provides federal grants to not-for-profits that offer business coaching along with the financing, but Brackemyre said it may apply to participate in the future.

Officials already are referring potential applicants to the Indiana Small Business Development Center network and Indianapolis-based Business Ownership Initiative for hands-on assistance.

BOI, which launched its own microloan fund in September after about 15 years of providing workshops and one-on-one counseling, is happy to help.

“We will go wherever we’re needed,” said Executive Director Julie Grice. (BOI isn’t part of the SBA program either, but Flagship Enterprise Center in Anderson is.)

Although her organization is looking to grow its loan portfolio outside Marion County, Grice said there’s enough demand to keep multiple microlenders busy. And since the loans tend to be riskier, she said local decision-making is important.

“It’s good to be close to your constituents,” Grice said. “We like the idea of doing the underwriting in our own backyard.”

Brackemyre acknowledged the value of that local connection, saying the microloan committee is more likely to go out on a limb than other lenders. But the idea is to move borrowers onto more stable financial ground, making them eligible for traditional financing.

“We don’t want to compete with banks,” he said. “Our greater goal is to have a nice downtown that’s prospering, and we might need to ease the [loan] qualifications for that to happen.”

Organizers are trying to build awareness of the existing microloan program—in part through bank referrals—even as they contemplate how to grow it. Brackemyre said there’s talk about allowing startups to apply, for starters, and there’s interest in expanding the program’s geographic reach if another funding source can be secured.

"It's another tool in our economic development toolbox," Phenicie said.