Ready for Rail Forgivable Loan Program Winding Down as Construction Nears Completion

by Nancy Homans, City of Saint Paul
June 13, 2013

The Ready for Rail Forgivable Loan Program is winding down as construction on the Green Line nears completion and the $4 million fund is almost depleted.  Data collected from applicants indicate that the program successfully served small (often very small) businesses, most of which were owned by people of color.

As of the end of May 2013, loans totaling just over $3.5 million had been made to 206 businesses.  Nearly two-thirds (64%) of them are owned by people of color.  Sixty six of the businesses are owned by women, with almost three-fourths of those being women of color.  Thirty six (17.5%) reported pre-construction monthly sales of less than $5,000. 

Financed by the Metropolitan Council, City of Saint Paul and the Central Corridor Funders Collaborative, the one-of-a-kind program offers loans of up to $20,000 per business to cover documented lost sales. The no-interest loans will be forgiven in equal installments over five years as long as the business remains in the Central Corridor. Businesses that move or close will be expected to repay the remaining balance or request that the balance be forgiven because of extenuating circumstances such as the sale of the building and/or eviction.

The program is administered in Saint Paul by the Neighborhood Development Center and in Minneapolis by the Metropolitan Consortium for Community Developers, both of whom have long established relationships with small businesses, especially those owned by women and people of color. Fifty five of the loan recipients are Minneapolis businesses, with the remaining 151 distributed along the portion of the line in Saint Paul. The individual loans ranged in size from $1,105 to the $20,000 maximum.

Based on the data provided by businesses in their loan applications, we are better equipped to understand how they have been affected by construction.* A few summary conclusions:

  • Different types of businesses were impacted differently. In general, bars and restaurants suffered less of an impact than small retail stores or barbershops and salons. Average monthly sales for bars and restaurants fell 20 percent during construction while barbers and salons experienced a 43 percent decline. Having said that, there was considerable variability within all classes with losses for bars/restaurants ranging from 2 percent to 65 percent and salons/barbershops from 7 percent to 86 percent.
  • The smallest businesses experienced the greatest impact.  Indeed, size of business appears to be a greater predictor of impact on sales than is type of business or geographic location.  However, it is important to note that, because the dollar amounts were relatively small, the impact on the smallest businesses was substantially mitigated by the loan fund.
  • There is some variability between geographic segments with respect to loss of sales—Lowertown/Downtown loan recipients reported an average loss of 12 percent while those in the area surrounding the Western Avenue Station posted a 36 percent average loss. The explanation for that variability, however, is not readily apparent. (It does not appear to be explained by, for instance, the duration of construction, the residential density of the surrounding area or socio-economic status.) Part of it is explained by the number of restaurants in a given segment. Stadium Village, for instance, where two-thirds of the loan recipients are restaurants, experienced a lower average loss (22%) than other segments in the Corridor. Losses for non-restaurants in Stadium Village, however, are comparable to those in other segments so the presence of restaurants does not appear to affect the surrounding businesses.

With the end of major construction, three adjustments to the program were made to maximize use of the fund.  The program was opened up to businesses at major intersections that were located more than one block from University Avenue.  Businesses that were directly impacted by construction (i.e. the street in front of their building was closed) for more than one construction season were invited to apply for up to an additional $10,000.  And businesses that received less than the maximum $20,000, but sustained losses in both years of construction, were invited to document those additional losses up to $20,000.

As of the end of May, a total of three businesses had closed and requested forgiveness of the remaining loan balance. 

Further information on the Ready for Rail Loan Fund is available at


* 12 businesses were found to be ineligible to apply for loans, half of which were not able to document any loss in sales. This analysis does not include data from those businesses or, of course, businesses that chose not to apply for whatever reason.