Provident Bank in Montebello, N.Y., is committing $26 million to reviving three decaying industrial cities in what is otherwise New York’s fastest-growing county.
The $2.5 billion-asset bank, in partnership with the Federal Home Loan Bank of New York, last month established a “Family Business Loan Program” under which it will provide low-interest loans to small and family-owned businesses that set up shop or expand in the central business districts of Newburgh, Port Jervis, and Middletown, the county’s only cities.
A local nonprofit development group, with backing from the Small Business Administration, is pledging an additional $25 million in low-interest loans to the redevelopment effort. It is intended to attract businesses, manufacturers, technology firms, and retailers, among others, to the three Orange County cities.
“By providing attractive new loan options these cities instantly become more desirable locations to create or expand a business,” said Robert Sansky, a Provident executive vice president, in a July 26 news release announcing the initiative.
Orange County, about an hour north of Manhattan, is one of the few in New York State whose population is rising. It has increased roughly 2% a year since 2000, according to census data.
Debbie Bogdanski, the vice president of government initiatives and special projects at the Orange County Chamber of Commerce in Newburgh, added that the county has also seen an explosion of small businesses in recent years, many started by recent Hispanic immigrants.
But Newburgh, Port Jervis, and Middletown have largely missed out on the boom. Unemployment in those areas is about 10%, compared to a countywide average of 4%.
Steve Dormer, also an executive vice president at Provident, said that banks have a responsibility to help stimulate economic activity in their communities. And if those areas spring back to life, they are likely to attract more business to Provident. Of its 36 branches, two are in Middletown, two are in Newburgh, and 12 are in other parts of Orange County.
“When the economy does well, banks do well,” Mr. Dormer said in an interview.
Loans made under the Family Business Loan Program would generally be used to buy real estate or equipment. The Home Loan Bank would advance funds to Provident at below-market rates under its urban development advance program, and Provident would then provide 50% of the financing for a particular project. The nonprofit, Progress Development Corp. in Middletown, would fund 40% of a project’s cost, with its portion guaranteed by the SBA. The borrower would kick in the other 10%.
In addition, Provident says it will set aside $1 million to provide working capital loans of up to $25,000 per borrower for a maximum term of seven years. The cities of Newburgh and Middletown are each contributing $100,000 and Progress Development is contributing an additional $50,000. These funds are designated for debt service.
The program is estimated to ultimately generate 600 new jobs, Provident said. Ms. Bogdanski said such growth would come slowly, though, because the borrowers are likely to be very small businesses that might add one or two employees at a time.
“We don’t typically make a big to-do about the number of jobs because it’s such a small number,” she said.
