(Updated 3:43 and 4:38 p.m.)
PROVIDENCE – The R.I. Commerce Corp. board on Monday approved a new loan program designed to benefit small businesses, approving $5.4 million in state funds for four development organizations and three micro lenders.
The loan program, dubbed the Small Business Assistance Program, is designed to provide forgivable loans to partnering organizations, who in turn make loans to qualifying small businesses having issues accessing working capital. The state expects the investment to leverage about $20 million in private funding.
“The goal is to create a lending platform, and meet unmet needs, but do it in a way that’s safe,” said Daniel Jennings, senior economic development adviser at Commerce RI.
The Small Business Assistance program is not meant to replace the state-run Small Business Loan Fund, which saw its applicant pool nearly dry up after the state’s failed investment in 38 Studios LLC. Commerce RI spokeswoman Kayla Rosen said the new program complements the Small Business Fund “by addressing unmet capital needs.”
The new lending program requires that each lender file annual reports including details about how many loans were made, how much money was used, and the number of jobs created, among other requirements.
In total, six companies submitted seven proposals and were awarded funds to make small-business loans of a minimum of $25,000, along with micro-loans between $2,000 and $2,500.
Funds awarded to the partnering development companies include:
- $1 million for South Eastern Economic Development Corp. (SEED), of Taunton, Mass.
- $1 million for the Business Development Corp. of Rhode Island, of Providence
- $1 million for Community Investment Corp., of Hamden, Conn.
- $1.9 million for CDC of New England, of Wakefield, Mass.
Funds awarded to the partnering micro-lenders include:
- $250,000 for The Center for Women & Enterprise, of Providence
- $125,000 for Social Enterprise Greenhouse, of Providence
- $170,000 for Community Investment Corp., of Hamden, Conn.
The state’s small-business and microloan lending program is similar to two federal programs run through the U.S. Small Business Administration of Rhode Island. The federal agency partners with certified development companies, such as SEED and Community Investment Corp., along with traditional lenders, including banks and credit unions, through its 504 Loan Program designed for small businesses. The agency also participates in a micro-lending program. The 504 loans made through the federal program, however, must go toward the financing of fixed assets, like real estate or equipment, which is not stipulated in the state’s loan program.
SEED in Rhode Island last fiscal year made seven loans totaling $2.5 million through the SBA’s 504 Loan Program, and seven microloans totaling $265,000, according to the SBA. Community Investment Corp. made three 504 loans totaling $1.7 million and two microloans totaling $80,000.
The state funding will positively affect small-business lending throughout the state, said Mark S. Hayward, SBA’s Rhode Island director. The augmented funding, he said, will help businesses “get as much bang for the buck.
“What Commerce RI did was maximize the leverage particularly as it relates to the SBA programs,” he said.
The state funding, through the partnering programs, will also benefit the federal 7a Loan Program, Hayward said, which provides small business owners with working capital.
Gov. Gina M. Raimondo, who attended the Commerce RI meeting, said a small business loan could go a long way toward helping small businesses that are struggling to access capital.
“This is where a majority of Rhode Islanders work,” she said.
The state received four responses to its request for proposals for the small business program, and three responded to the micro loan RFP.
Commissioner Jason Kelly argued for the program, saying it puts money into the hands of partnering companies that truly understand the small business lending process.
“It would be easy for the administration to say, ‘we’re going to administer this program ourselves.’ [But] these institutions have been around and they’ve been around for a while. We recognize this is what these particular companies do,” he said of the partnering organizations.
