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Loan Programs a Success

On the eve of its 30th anniversary, the Erie County Industrial Development Agency's Regional Development Corp. has compiled an impressive track record of successful loans despite operating in various roller coaster-like economies.

The RDC serves as an adjunct to traditional lending practices, targeting loans to firms in distressed portions of the county or designated economic development zones. Loans are fixed at 4 percent and usually written for a period that runs between five years and seven years.

A 73-page report that details the RDC's activity since making its first loan in 1979 shows that it made 520 loans to businesses that collectively totaled $88.1 million while leveraging $684.8 million in private investment. That translates to $7.77 in private-sector investment for every dollar the RDC loaned.

Of its loans, total net charge-offs on failed loans was 113, with a value of $11.3 million, or 12.7 percent of the $88.1 million loan volume.

The average loan was $169,423 and ranged in size from $4,200 to Papke Jewelers in Buffalo to $1 million packages approved in 1985 for American Brass LP - now Luvata Buffalo - and to Cyber Digital of Amherst.

The fund is financed through returns on the principal and interest payments.

"Given that these loans serve to enhance a business' relationship and loan capacity with a private lender, the multiplier effect of the RDC loans, at almost eight times each dollar loaned, is dramatic," said Alfred Culliton, ECIDA chief financial officer. "This program has been a huge success."

Business First of Buffalo - by James Fink