Bank loans help create 588 R.I. jobs

In 2005, both Citizens Bank and Sovereign Bank created low-interest loan programs for New England businesses looking to add jobs. Today, after a combined $27 million in loans that helped create 588 jobs in Rhode Island alone, both programs are being called a success.
“Anytime a large bank can take a leading role and offer a cheaper, more flexible loan, it’s a terrific catalyst for the economy,” said Mike Saul, managing director of finance for the R.I. Economic Development Corporation, which partnered with both institutions on the programs to help promote them to the business community.
Citizens launched its New England “Job Bank” in February 2005 with a $100 million fund, offering loans to companies committed to adding jobs in the region and partnering with state officials and economic development agencies to promote the loans.
“It was a program implemented in the mid-Atlantic region, and we had such success with it that we, in conjunction with the EDC and the governor’s office, decided it would be great for Rhode Island and New England,” said Mike Clarkin, senior vice president of commercial lending at Citizens.
“I think this is a tremendous success, not only because of the number of jobs, but because of the public and private partnership that this represents,” he said. “The more jobs we can create in a community, the more vibrant a state we will have.”
Companies can borrow from the Job Bank to pay for equipment purchases or to buy, expand or rehabilitate a building, Clarkin said. For each job they pledge to create, they can get up to $40,000 in capital. The minimum loan amount is $240,000, and the maximum is $5 million.
The response to the program throughout New England was so strong that last April, having already closed 89 loans for $93 million, and with an additional 37 loans for $54 million in process, Citizens created a second New England Job Bank, for $150 million, aiming to help create another 3,750 full-time jobs in the region.
In Rhode Island, Clarkin said, a total of 13 Citizens Job Bank loans for $11 million have been made so far, helping create 400 jobs in the state.
One of the loan recipients was Renova Lighting Systems Inc., which borrowed $300,000 last year, pledging to create seven jobs within three years. So far, three people have been hired.
“We were in the market to buy out an investor who owned the company previously, as well as to invest in new equipment and other things that we needed to grow the business,” said Dave Nadeau, who co-owns the company with Rick Edwards.
Nadeau said that the Job Bank loan was perfect, because it allowed the company to create jobs and receive a great interest rate, 4.99 percent fixed for five years. The prime rate is currently 8.25 percent.
“We got an interest rate for under 5 percent, and it’s a much more flexible program,” he said.
Sally Lapides, owner of Residential Properties, also credits a 2006 Job Bank loan with helping her business grow and create jobs.
“I’ve added 14 jobs in the Cranston office and six in the Newport office,” she said. “I feel that this program is proactive for the state, because we have not had a lot of employment or population growth.” The program “matches my commitment” to grow in the state, she said. And without the loan, the office expansions would have been put on hold.
Sovereign’s Job Foundation Loan Program began in the bank’s home state, Pennsylvania, and was expanded to Rhode Island in June 2005.
The program requires that the borrower be located in the state, have been in business for two years with up to $10 million in revenue, and plan to create jobs. Borrowers receive $250,000 for the first three jobs and $50,000 for each additional job, at below-market interest rates. The minimum loan amount is $250,000, and the maximum is $2.5 million.
“It’s a job creation and retention program,” said Frank Casale, senior vice president of Rhode Island business banking for Sovereign. “Jobs had rebounded on a national level, but we had reports that in Rhode Island there were decreases, so we stepped up to the plate.”
To date, Sovereign says it has closed 15 loans for a total of $16 million, helping to create 188 jobs. The institution also has another $4 million to $5 million in loans “in the pipeline.”
But both programs might benefit from more promotion. Saul said he wasn’t familiar with the Sovereign program – though the RIEDC does refer businesses to it – and he said the Citizens Job Bank could be better publicized.
“To me it’s a successful program, but could it be more successful? Yes,” he said. “If there were more channels to make companies aware of it, I think it could [have more impact]. The good news is that banks are doing leadership things, but I bet they could have been more aggressive.”