Reed City bakery to receive loan from city
REED CITY -- In a 5 to 1 vote, the Reed City City Council approved a motion to move forward with a $14,600 loan to White Stone Bakery owner Michelle Sines to purchase equipment, furniture and fixtures, and to make improvements to her downtown store.
At the city council meeting in December, the council gave the go ahead to draft the necessary documents for the loan that would include the terms of the loan, the interest rate and the lien on the equipment purchased, which would serve as collateral for the loan.
According to city manager Ron Howell, the loan will come from an existing small business loan fund that the city began about ten years ago.
"The fund is the result of a Community Development Block Grant (CDBG) the city received several years ago to finance economic development," Howell said. "Once the funds were paid back to the city, the city was then allowed to recycle them and loan them out again at their discretion."
The fund currently has a balance of $51,000, he added.
Beginning in 1974, CBDG funds have been provided through the Department of Housing and Urban Development (HUD) as a source of financing economic development, as well as other projects, in communities with limited resources.
Howell said council members had encouraged Sines to apply for the loan after seeing her new bakery business start-up last fall.
Sines had been doing all of her baking at her home and bringing the baked goods to the store front downtown to sell because she was not equipped to do any cooking at the store, Howell said.
"Her oven at home only allows her to bake about three dozen cupcakes, whereas a commercial oven would allow her to do hundreds," Howell said. "This loan will allow her to prepare her store for baking and provide a place for customers to come into the store."
Going through the city was not Sines first choice, Howell said. She had gone to banks and credit unions and was denied a loan to get the needed equipment and updates.
"The bank denial is something the city requires to receive money from the revolving fund," Howell said. "We are a loan of last resort."
One concern of the council was the business's lack of cash flow.
Council member Dave Scharlow, who vote against the loan, said Sines stated in her presentation that she wasn't making any profit, and he felt putting money into someone's building is not a smart use of funds.
Howell said Sines gave very conservative future projections for her business, but was very confident that she would be able to meet the loan requirements.
"She had everything from a layout of the previous three months to a projection of the next five years in what she expects her business to do," Howell said. "The council is hopeful that once Sines is operating out of the bakery full time, there will be an increase in business and thus in profit."
"The idea is that the small business will be able to pay off the loan and move to a more traditional route of financing in the future," he added.
Howell said this is the third such loan from the city to local businesses that he is aware of.
Around two years ago, the city approved a loan to Reed City Brewery. Although the loan was for five years, the brewery has already paid back the loan, he said.
Previous to that there was a loan given to an individual wanting to purchase a T-shirt printing machine as part of the Crossroads Quilt Shop on Higbee Street, which has since closed.
Sines said she has no comment on the loan from the city at this time.