Community Development Block Grant
Worcester, MA - Mayor Raymond V. Mariano
Loan Guarantee Program
Worcester's Business Assistance Program provides financial and technical assistance to developers, nonprofit organizations, micro-enterprises and private businesses to start, locate or expand businesses in the City. The City allocates nearly four percent of its CDBG resources for this aspect of economic development, while a total of 10 percent of its CDBG funds are allocated to various economic development programs city-wide and in the neighborhoods.
Worcester has used HUD Section 108 loan guarantee funds to provide credit enhancements, not direct loans, to City businesses. It provides gap financing, rather than acting as the primary lender, and has only used the funds to enable the borrower to secure conventional financing for eligible projects. Rather than drawing down the Section 108 funds, the City guarantees repayment if the project goes into default, thus incurring only interest costs in such cases. While the loan guarantee represents a pledge of the City's CDBG entitlement funds, the loan guarantees are structured to minimize the risk to the CDBG program by requiring an applicant to pledge collateral against the guarantee amount.
The City has received authorizations for a total of nearly $29 million in Section 108 funds, and has used approximately $18 million of this so far to assist seven projects. After recent pay-offs, the City now has approximately $20 million in loan guarantee authority available to support new projects.
The first loan guarantee went to Four Biotech ($12.1 million) to construct a 93,000-square-foot research development facility at the Massachusetts Biotechnology Research Park and to secure permanent mortgage financing. While the facility has recently been sold and the City released from its guarantee, the facility is now more than 90 percent leased and has created 78 jobs. Also assisted was Community Healthlink ($4.2 million) which provides health services to low- and moderate-income substance abusers in two renovated buildings in the former vacant City Hospital complex. This project created 10 new jobs. A local business, A.A. Brunell Electroplating Corp., received a $220,000 loan guarantee after it was forced to restructure its debt and needed additional working capital to maintain operations. The project retained 11 jobs, seven of which went to persons from low- and moderate-income families, and the company has remained stable ever since. The most recent guarantee was made to TSI/Mason Corporation, a biomedical research company, to secure a conventional loan to purchase and renovate the adjoining property and expand its research laboratory operations. The company expects to create 40 new jobs, 75 percent of which will be made available to members of low- to moderate-income families
Contact: Julie Jacobson, Economic Development Coordinator, Office of Planning and Community Development, (508) 799-1400
The United States Conference of Mayors
J. Thomas Cochran, Executive Director
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