A business owned by indicted and suspended Jacksonville City Councilwoman Katrina Brown is on the hook for a nearly $2.7 million U.S. Small Business Administration (SBA) loan.
Brown and suspended Councilman Reggie Brown are accused of using the government-backed loan for personal gain.
It’s called an SBA loan but that’s a misnomer according to Gil Colon, deputy director of the SBA’s North Florida District.
“SBA does not do any direct lending whatsoever. Zero,” said Colon.
What the agency does, according to Colon, is make it easier for small businesses to get private loans by guaranteeing the bulk of the money will be paid back “The loans can be for anything. [It] can be for equipment. It could be for facilities. It could be for supplies. It could be for working capital. So a lender is available to do that, but a guarantee moves them even closer to making the loan.”
Colon said a company that applies for an SBA-guaranteed loan typically has to submit a business plan and document its history, something Katrina Brown’s family business CoWealth did when proposing to buy and renovate a building on Commonwealth Avenue and turn it into a barbecue-sauce production plant.
“We will be looking for the character of the business or the individuals, the management expertise, the commitment to success. The money they are requesting, will they have enough to run the business, to make a profit and repay the loan,” Colon said.
Once the guaranteed loan is approved — as Brown’s was by New Orleans-based Biz Capital — the borrower will either get the money in a lump-sum or be required to draw down the loan, bit by bit, by submitting invoices.
“In other words, the bank has agreed with the total amount of the loan but they want to provide you the money on an incremental basis,” he said.
That’s the process Katrina Brown and Councilman Reggie Brown are accused of exploiting with bogus invoices from fake companies that listed Reggie Brown as their CEO.
The two have been indicted on dozens of federal charges stemming from the alleged scheme and were suspended from office by Governor Rick Scott, who will appoint their replacements.
The Florida constitution gives the governor broad powers to suspend local officials who have been indicted on crimes. It also gives the state’s chief executive the power to temporarily replace them.
Katrina Brown and Reggie Brown are free on $50,000 bond each. Their arraignment hearing is scheduled for Thursday, June 14.