PROVIDENCE, R.I. (WPRI) – The owners of a high-end Providence liquor store say they still plan to pay back all of their $150,000 taxpayer-funded business loan from the city after falling behind on payments earlier this year.
Michael and David Iannazzi, two brothers who own Nikki’s Liquors on Branch Avenue, told Target 12 it has taken “a little time to build back up the customer base and get the store profitable” since they secured the loan from the Providence Business Loan Fund (PBLF) as part of their move from a building on the North Providence line to the new location in 2014.
“We had growing pains,” David Iannazzi told Target 12. “It was basically like starting over. Our old customers couldn’t find us. The items we stocked were different. It took time but we’re now up 20 to 30 percent from last year. And we’re going into a holiday, a busy season.”
Nikki’s owed the city $138,633 and was considered 217 days past due on its loan as of Nov. 4, according to a PBLF aging report obtained through a public records request. (Only $11,000 is considered past due.) All told, the city’s loan portfolio includes 85 recipients who owe $11.6 million. Twenty-two recipients are at least 200 days behind on payments, records show.
The PBLF was previously known as the Providence Economic Development Partnership, but the agency changed its name last year as part of a rebranding effort. It functions as an arm of the city’s planning department, providing low-interest federally-funded loans to small businesses that have been rejected by traditional lenders. All loans are approved a board of directors appointed by the mayor.
But the loan program has come under fire from the U.S. Dept. of Housing and Urban Development (HUD) in recent years for a lack of oversight over the loans and a high default rate in its portfolio. In 2014, the city repaid HUD $1.92 million to cover a slew of loans and other expenditures HUD ruled never should have been authorized, including $618,000 for dozens of purchases that the PEDP made between 2005 and 2011.
City officials have spent several years attempting to clean up the PBLF’s loan portfolio, writing off dozens of uncollectable loans while ramping up collection efforts on existing businesses that had fallen behind on payments. HUD has praised the city for taking steps to improve its loan policies and procedures since 2013.
Best known for its assortment of more than 1,200 craft beers, Nikki’s Liquors won unanimous approval from the PBLF board for a $150,000 loan on April 17, 2014, according to public meeting minutes reviewed by Target 12.
At the time, the Iannazzi brothers told the board the business was generating $1.5 million in annual revenue with a gross profit of 22%. They said the move to the Branch Avenue location would give them 5,000 square feet for $50,000 a year compared to the $81,000 they were paying for 2,000 square feet at their location in a plaza on the North Providence line. They also agreed to create five new jobs.
Tom Hoagland, the director of the PBLF, told Target 12 Nikki’s is considered to be in default on the loan, but the city has “been working with them on a program to catch up.” He said Nikki’s made payments to the city in September and October.
“We believe our collateral position is adequate and so long as they are operating and making payments, we would prefer to work with them and not put them out of business,” Hoagland said.
This report has been updated to reflect that only a fraction of the $150,000 loan is considered past due.