PORTLAND — A walk through the Old Port reveals how the recession is affecting local small businesses. Over the past year, for-lease signs have replaced open signs in some of the city’s most coveted storefronts.

“I walk down the street and it’s disappointing,” Councilor Cheryl Leeman said. “A lot of small businesses are struggling.”

That’s why the City Council could soon decide to establish a gap-financing program for new small businesses and those hoping to expand and create jobs.

Under a proposal approved Dec. 16 by a 2-0 vote of the Community Development Committee, the program would receive $100,000 in Community Development Block Grants from the U.S. Department of Housing and Urban Development.

The city receives about $2.1 million in CDBG grants every year. Typically, grants are awarded to social service agencies and are used to pay for infrastructure projects in low-income neighborhoods.

Leeman, who is the CDC chairwoman, said there is no guarantee that the program will be funded, even if the council approves it in early 2010. The program will have to compete for CDBG funds in March. 

“We have to get in line like everybody else,” Leeman said.

While the program would compete for funding, she said it is not expected to make it more difficult for social services programs to get funds.

“This would come out of the additional funds after you’ve funded your social services,” Leeman said. “We felt it was important enough to move it forward to the council and at least get the program set up, especially with the economy the way it is. We’re trying to be proactive in terms of setting up additional tools for businesses.”

The program is not designed to bail out struggling businesses, but to help new businesses open up in Portland and help existing businesses expand. Leeman said the program would be administered by the city’s Economic Development Division.

Under the proposal, businesses withing the first year would have to create at least one new job for every $10,000 received from the city. New jobs must be made available to Portland residents, 51 percent of whom must qualify as low- to moderate-income.

A single business could receive up to $20,000 to renovate under-utilized space; enhance accessibility for the elderly and handicapped; finance equipment or relocate. While $1,000 may be used for consultants, businesses may not use the money to refinance debt or obtain other financing.

To be eligible, businesses must be in Portland and not owe any back taxes.

City Economic Development Director Greg Mitchell and Nelle Hanig, a business development representative, said in a memo to the CDC that the program will replace the Facade Improvement Program, which received $85,000 in CDBG funds.

Under that program, business could get up to $10,000 to improve the outside of their buildings, but were required to match those dollars.

“(The city) continues to receive facade improvement assistance and consequently wants to recapitalize the facade improvement program,” Mitchell and Hanig said in the Dec. 10 memo. “However, given the pressing need at this time for job creation and business growth, we decided it was preferable to seek CDBG funding for this new business assistance program.”

Leeman said the proposal represents a shift in the way federal funds are being used.

“There has been a refocus on those dollars from the feds towards economic development,” she said. “I think this is a great program.”

Randy Billings can be reached at 781-3661 ext. 100 or rbillings@theforecaster.net