Calais Offers Low Interest Loans for Economic Development

By Lura Jackson

For the past 25 years, the city of Calais has offered sizable low interest loans to individuals working to bring economic development to the city. The loans are available to help new businesses get started as well as for established businesses looking to expand their facilities or upgrade their equipment to stay competitive and avoid closure. Since its inception, the loan program has provided approximately 50 projects with the funds necessary for business growth, and it continues to be a central part of the ongoing revitalization of the city.

The initial funds for the program came from a federal grant in the late 1980s known as the Urban Development Action Grant (UDAG). The funds have since been cycled through repeatedly, with a number of success stories emerging as a result. The largest loan was for $125,000, given to radio station WQDY a few decades ago. More recently, Jo's Diner and the State Cinema Movie Theater have utilized the funds to upgrade their facilities.

The loans are broken into two categories, with those below $15,000 handled by the Calais Revolving Loan Fund and those above that amount handled by the Economic Development Loan Fund. The maximum loan size is $100,000, though the volunteer board can approve higher amounts on a situational basis. The smaller loans have an interest rate of 1% above the prime rate (or the borrower can lock in at 5%), and they are required to be backed by 100% collateral. The larger loans are available at 1% below prime, though the required collateral must be in the form of real estate located in Washington County. The smaller loans have a repayment period of five years while the larger loans are ten years, though the board will approve extensions as needed.

 “There is a job creation component for the larger loans,” Development Director and Interim City Manager Jim Porter says, explaining that for the first $50,000 one quality or three base jobs must be created. The requirement increases incrementally after that, with each additional $20,000 requiring .5 quality or 1 base job. Alternatively, if jobs at an established business are threatened, maintaining those jobs (by upgrading the business) is seen as a viable use of the loan funds. Funds cannot be used for salary or benefit costs, or to refinance existing debt.

Borrowers will need to demonstrate the ability to repay the loan, including having a sound business plan, acceptable cash flow, and a reasonable credit score. Additionally, borrowers can't be behind in their payment of utilities or back taxes to the city (though an amendment to this statute is being considered at the board's next meeting). “It's not our intention to compete with banks,” Porter says. A former requirement for a loan was to have been turned down by a bank, though as that introduced a higher element of risk it was removed (Porter adds that no taxpayer funds are ever accessed or at risk for the city loans). Even still, Porter prefers that the loans be considered as a viable backup opportunity rather than a first resort for individuals looking to create or expand their business. 

Individuals interested in learning more or applying for a loan are welcomed to send inquiries to Jim Porter at asstmanager@calaismaine.org or at 454-2521 ext. 1002.