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The High Point City Council paved the way for a new small business loan program on Tuesday night.

The council held a public hearing on the program that will create a loan pool of $9.7 million — $3.9 million from the city and funds from local banks.

The city’s funds will be borrowed from HUD using Community Development Block Grants as collateral.

Mike McNair, director of community development and housing, said three banks have expressed interest, and he hopes to have more banks on board in order to establish a loan committee, which would review applications.

McNair said the city would fund 40 percent of a loan and the banks would pick up 60 percent. According to documents in the board packet, loans should not be less than $50,000 and no more than $300,000.

The businesses must create up to one full-time job for each $50,000 received and at least 51 percent of those jobs created must be retained for one year.

McNair said the cities of Fayetteville and Greensboro have had only one default each during the length of their programs, and each time the cities received all their funds back. Fayetteville has had its program for 12 years, and Greensboro has had its program for 5 years.

A third party would be used to help businesses prepare loan applications and to provide consulting before sending the application before the loan committee.

If for some reason the city is not able to pay back any of the funds it has borrowed, HUD would take funds from the city’s block grant funds. McNair said there hasn’t been any incidences of default nationwide.

Councilman John Faircloth asked if this was a citywide program.

McNair said the program is designed to target the Core City areas, but it could be applied anywhere. The Core City is a city project with the goal of revitalizing specific areas in the city, including South and North Main Streets and Washington Drive.

Contact E.A. Seagraves at 883-4422, Ext. 241, or elizabeth.seagraves@news-record.com