MECKLENBURG COUNTY, N.C. — More than a year after Mecklenburg County created a $5 million program to help small businesses survive the pandemic, public records show more than $250,000 worth of taxpayer-funded low-interest loans are delinquent.
'I am concerned about it to the point we need to learn from it'
The COVID-19 Small Business Emergency Stabilization Loan Fund's most recent delinquency report identifies 11 businesses that are at least a month-and-a-half late on their payments. According to the report, a handful of businesses are 56, 77, 117, 148 and 381 days late.
"It clearly shows, when we're trying to reach out and trying to support and keep businesses stood up, we just weren't able to help everyone," Mecklenburg County Commissioner Mark Jerrell said. "I think we have to dig deep and understand exactly what the data's showing us, what it's telling us and how we can support businesses in the future."
The county's quickly-assembled loan program continues to serve as a lifeline for more than 200 small businesses, but in the face of its overall success, Jerrell said questions remain. He said the county expected some level of delinquency. Still, he's calling for more oversight.
"I think it certainly has been successful. Are there tweaks or adjustments that probably need to be made? Yeah," he said. "I think when you look at the dollars in aggregate, it's a high number...I do think we need to drill down and ask, 'Are there adjustments that need to be made?' If there are, we need to make those adjustments, because we're here to get the biggest return on investment for taxpayer dollars and so, we want to make sure that we're doing everything we can and we're doing it right."
Jerrell, who has championed this program from the start, said he feels bad for the businesses that are behind on their payments. Federal records show most of the delinquent recipients, including the four most delinquent, also received Paycheck Protection Program loans.
"There should be a concern, but I think we've got to understand the why," Jerrell said. "It's a really sad situation on a lot of levels."
Fellow County Commissioner Pat Cotham said she wants a full-scale audit.
"I am concerned about it to the point we need to learn from it," Cotham said. "I think you have to figure out what went well, what didn't, how can we go forward in a better situation? I want to know. I'll be asking that question."
'I just want us to learn from that'
Cotham, who felt uncomfortable with the amount the county paid a third party to manage the program, said she's glad the county created the program.
"I just want us to learn from that, so maybe next time it's not a quarter million, maybe it's $100,000 -- I mean, nothing's going to be perfect," she said. "If we can just learn from it and do better, that's all we can hope for."
The third-party vendor, the Carolina Small Business Development Fund did not respond to WCNC Charlotte's questions directly. Instead, the organization responded by way of a Mecklenburg County spokesperson.
"CSBDF is not seeing any specific patterns that would indicate Mecklenburg's program results are abnormal or adverse," the non-profit's statement said. "The current ratios are consistent with other programs that we manage and consistent with our expectations for the Emergency Stabilization Loan Fund, given the economic environment in which businesses are operating. We are not unduly concerned at this time. Good management of any loan portfolio includes policies and procedures related to handling delinquencies. We take a standardized approach in collecting on past due accounts. We will continue to monitor the portfolio in accordance with our commitment to the borrowers and to Mecklenburg County Government."
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Mecklenburg County response
Mecklenburg County declined to talk on-camera about the delinquencies.
"The Office of Economic Development is satisfied that the current delinquency rates are well within normal expectations for programs that are responsive to emergencies and natural disasters or those targeted to small businesses not served by traditional commercial lender," the Office of Economic Development said in a statement. "OED and CSBDF have bi-weekly meetings during which any delinquencies and appropriate mitigations are discussed. As the loans in the portfolio transition from interest only to interest and principal payments, the two organizations will closely monitor to see if there are changes in delinquency rates and what steps if any are necessary to mitigate any adverse changes. Please note that as of the most recent portfolio reports, 12 borrowers have repaid their 10 year loans in full in less than one year. Comparatively, there are four loans with balances that are more than 60 days past due. There are 220 loans so 1.8% of the portfolio is 60+ days delinquent while 5.4% of the portfolio has paid of their loans nine years early."
In response to WCNC Charlotte's request for additional details, the county did not specify expected delinquency rates.
"The Emergency Stabilization Loan Fund is currently performing as well as other non-emergency, community-based small business loan funds," the county said in a statement. "Disaster and other emergency loan funds have had widely varying delinquency and default rates, uniquely dependent on the circumstances of the emergency and their disparate geographic locations. This renders it difficult to make meaningful comparisons between fund performance. Given the significant impact of the COVID-19 pandemic on small businesses, the overall performance the Emergency Stabilization Loan Fund indicates it was successful in its policy intent of providing emergency gap financing to qualified, stable businesses until other lending and grant programs at the federal and state level were available."
In a recent letter to the county, CSBDF detailed its collection process, which generally includes written and verbal notices when businesses are past due. However, two delinquent business owners told WCNC Charlotte they never received notices, which calls into question whether the program's oversight is strong enough.
WCNC Charlotte has since shared those businesses' names with the county for appropriate follow-up. The businesses pledged to make their overdue payments.
Jerrell fears the financial help from the county likely "came too late for many." Cotham, meanwhile, wonders if the businesses received the proper technical assistance.
"Should we have done more to help them manage it?" she asked.
Until WCNC Charlotte pushed for more transparency surrounding the program, both the county and elected leaders did not know exactly which businesses received loans. Following the release of that information, WCNC Charlotte discovered the county unknowingly gave loans to delinquent taxpayers.