A few weeks ago, my friend Robin Squibb told me about her attempts to get a loan for her business, Granny Squibb’s Iced Tea, through the Providence Economic Development Partnership. Asking for just $50,000 turned into a 15-month process in which Robin had to keep reaching out to people she knew to gain insight into the loan’s progress, and her business missed opportunities for growth as a result.
One of the primary functions of the PEDP has been to make loans to local businesses, but over time, this function has swung from two extremes. Too often it has been highly political and not made decisions based on solid business plans of the applicants. At other times it has been so cautious to avoid being criticized for playing politics that too few loans get made and this critical source of capital for our businesses sits on the sidelines. The bottom line is that the PEDP, as it is currently structured, is not fulfilling its mission, and business as usual simply isn’t working for Providence’s business community.
That’s why I’m proposing taking the politics out of the issue by moving the revolving loan functions of the PEDP into a new, independent program and letting the PEDP board do what it does best: advise and strategize.
The partnership’s board of directors is made up of business and community leaders, and their background and experience position them to be a great resource for revitalizing the city’s economy. However, the members of the board are not underwriters, and their time and talent are not being used well by asking them to simply rubber stamp staff recommendations on loans.
At its core, the PEDP ought to be about helping our city’s businesses, which in turn will help the city grow and prosper, and this is too important a purpose to be swept up in the cloud of politics. In this time of serious economic challenge, the partnership remains a missed opportunity, but with the reforms I’m suggesting, I know we can start to right the ship. As mayor, I would work with the business community to establish a fair, impartial way to turn the partnership’s loan-making decisions over to knowledgeable, independent practitioners who are in the business of evaluating and loaning funds to worthy, growing business ventures and ensuring that the loans are repaid in a timely manner.
This new approach to the lending process must also include expanded offerings for businesses. If, instead of granting large and midsized loans to a select number of businesses, we instead granted microloans accompanied by technical assistance and training to an increased number of businesses in every neighborhood, we will be able to make a much greater impact on city businesses without any added expense. With better underwriting would come lower default rates, and this would free up funds to let the new loan-granting body approach investment in creative and innovative ways.
Citywide economic development is the primary focus of many mayors across the United States, and it should be. The best practices are out there. We don’t need to reinvent the wheel, but we do need to draw on the successes and failures of hundreds of other American cities. This proposal is just one piece of my economic development plan and it is based largely on the successful strategy employed in Seattle.
As I continue to meet with business leaders and to develop my plan to grow Providence’s economy, I will do so with close attention to mayors around the country who share my commitment to living in a vibrant, affordable, diverse and economically prosperous city.
Brett Smiley is running for mayor of Providence in the September Democratic primary. He is the former chairman of the Providence Water Supply Board and is the founder and owner of a small accounting and election compliance firm in Providence.