City must go after unpaid business loans

The city of Lorain is right by going to court to collect money lent to small businesses that have not repaid millions of dollars in loans.

This has become a huge problem, and the city must correct it.

Over the summer, the city filed at least three lawsuits seeking to collect $190,753 from three businesses that have outstanding loans for business development.

City officials filed the lawsuits in Lorain County Common Pleas Court.

Safety-Service Director Dan Given and the city Departments of Law and Building, Housing and Planning say the loans are part of a group of 25 outstanding loans worth more than $1.18 million.

The legal actions come as the latest step in a continuing review of Lorain’s business development loan portfolio.

At the beginning of 2016, Lorain put the business development loan program on hold and stopped lending money to small businesses.

But staffers are continuing to examine records about the existing loans.

The city started looking at the true loan balances, payments, and everything associated with the loan programs, including who owes and who is delinquent.

Members of the city’s loan review board include: Given; and Kellie Glenn, director of Building, Housing and Planning; Robyn Davey, disposition agent in the Department of Building, Housing and Planning; and Assistant Law Director Don Zaleski.

One of the first steps from the new loan review board was to establish an updated policy for all loans.

Once the panel established that policy of how to deal with borrowers, the members started working through the list to determine who is making timely payments and who is in default.

What was good to hear was the loan review board said the city will not walk away from the loans.

As for the borrowers, Driscol Music Co., which owes $232,660 to the city, is the single biggest recipient in default.

Driscol Music has a case pending in federal bankruptcy court. The city must await a ruling there to see if Driscol Music will repay the city loan.

One of the borrowers was Joel R. “Smittie” Smith, a popular Lorain businessman who died of cancer in August 2012.

Smith’s estate owes the city $53,072, but city staffers said it is unclear if or when the city ever will collect any money.

Marxan Solutions Inc., the business of Lorain school board member Mark Ballard, still owes $135,714 of a $140,000 loan approved by the city in 2014.

Ballard and Mayor Chase Ritenauer said the city will modify the loan to settle the issue.

The loan agreement indicates Marxan Solutions borrowed the money to purchase a non commercial radio station and related towers.

The station is 89.1, WNZN, located at 1505 Kansas Ave. in Lorain and the tower is located in Berlin Heights.

Meanwhile, Worship Cathedral Inc., 2428 Elyria Ave., owes $23,752 from a March 2009 loan from the city.

Attorney Anthony Baker, who represents Worship Cathedral, said his client wants to work out a solution.

Baker said the church borrowed money to make repairs and used a contractor from a list provided by the city, but ended up spending more money because repairs were not up to code.

R& J Southern Style Cooking of Lorain owes $31,286 from a February 2011 loan.

The restaurant was located at 113 E. 28th St. in Lorain.

Because of the loan defaults, the city created a uniform late notice and default policy for all loans.

And it’s a fair policy, similar to banks and credit unions.

Borrowers late on payments for the first time will receive a general late notice advising the money is due immediately. And borrowers will get additional notices when they are late 30 and 60 days.

If the loan is not made current by the deadline in the 60day notice, the loan goes into default and the entire amount is due within 15 days.

After that 15-day period, the case goes to the city Law Department for foreclosure or judgment.

The borrower and city may modify the loan agreement to avoid default. Those modification requests may be considered on a case-by-case basis. Requests may be made by the city or the borrower, and only one modification will be permitted per loan.

If the city goes to court and obtains a judgment against the borrower, a collection agency will take on the duty to retrieve the money.

The city has no choice in this matter; it must try to get back every penny loaned.

There could be extenuating circumstances that led to the loan defaults. But the practice of businesses not repaying the loans has to stop.

Businesses that took the loans agreed to pay the money back. If the loans are not repaid, businesses can expect a lawsuit.