MARIETTA - The city of Marietta is giving away money to small businesses.

The initiative, called the Marietta Growth Fund, was originally designed to be a loan program for small businesses, but after the city discovered a lack of interest in obtaining such loans, it switched to handing out dollars in the form of grants.

To qualify, a business has to be in a "distressed area" where there has been a lack of investment, with vacant office buildings, aging properties and high turnover. Areas of the city that qualify include Franklin Road and parts of Powder Springs, Canton and Fairground roads. Another stipulation requires at least one new position to be created for every $25,000 received.

The program dates to 2005, when Beth Sessoms, the city's economic development director, applied for and received $99,200 in federal Housing and Urban Development funding to create a small business loan gap financing program.

The city was awarded another $99,000 by HUD in 2006 for the program. HUD asked the city to have a financial stake in the program as well, so the city contributed $50,000.

The ideal situation, Sessoms said, is where a small business needed to buy a piece of equipment that cost $100,000, but the bank would only lend it $70,000. In that example, the Marietta Growth Fund would kick in the remaining $30,000, and the funding would be loaned at a prime rate.

Yet despite advertising the program, Sessoms found there was no interest from small businesses in Marietta.

"Applicants weren't interested in a loan. They wanted free money," she said. "Because of the paperwork involved, businesses weren't interested in the lower interest rate."

So the city asked HUD to change the program from a loan to a grant program, which HUD agreed to do. The City Council never changed the $50,000 it kicked in to fund the grant program, though, so that portion of the funding is still earmarked for loans.

While no loans were ever made, two businesses have benefited from grants. The grants haven't gone to fund salaries, but improve capital expenses. For instance, Summit Industries, a manufacturing company on Pickens Industrial Drive near Interstate 75, which received $75,000 from the city in March, used that money to expand its product line, allowing it to add three new positions.

Sundial Plumbing Services off Old 41 near Kennesaw Avenue, which was awarded $75,000, is expected to create six new positions by purchasing three new trucks.

There is $48,200 remaining in the grant fund and $50,000 in the loan fund for small businesses to take advantage of.

Mayor Steve Tumlin said it's not the city's job to be a bank, although he registers no objection to the program.

"I think the city ought to be a catalyst for economic development, and I just see this as an economic development tool," Tumlin said.

Funds are awarded by a grant/loan review committee, which forwards recommendations on to the city council. Members of the committee include Alexis Amaden, owner of the Whitlock Inn: Todd Brumbelow, a managing partner with Crowne Office Suites: Peter Fullen, a CPA; Denise Hardin, a SunTrust Bank vice president; Mary Karras, a vice president with Bank of North Georgia; financial consultant Terry Lee; Amy Phillips, an executive with InfoMart and Councilman Grif Chalfant.

Despite morphing from a loan to grant program, Sessoms believes the initiative has been successful.

"The whole purpose of it was to create jobs. Jobs is the whole purpose behind it," she said.