When Rhode Island secured a $13.1 million grant from the U.S. Treasury to lend to small businesses in 2011, finding Ocean State companies to take the money didn’t register as a concern.
It’s become one at the Small Business Loan Fund, the arm of the R.I. Economic Development Corporation managing the funds and still experiencing a hangover from negative public perceptions of the 38 Studios LLC loan-guarantee debacle.
One of three organizations to receive a piece of the grant, the SBLF has struggled to find takers for its $2 million loan pool thanks to dwindling applications in the 10 months since 38 Studios collapsed.
With wholesale leadership changes in state economic development and a lawsuit against those involved in 38 Studios, many businesses apparently wrote the SBLF off.
“We went over four months without a transaction, starting last summer and going into the fall,” said Sean Esten, director of financial programs at the EDC. “We have been going to community forums and telling people we are open for business as usual. But it was tough to get the message out.”
In addition to the cost in opportunity of not utilizing its capital, the SBLF slowdown threatened to hold back the 2011 federal grant money due to the other two recipients, public venture capital Slater Technology Fund and the Betaspring startup accelerator.
Slater is the largest recipient of the grant, awarded through the Treasury’s State Small Business Credit Initiative, due $9 million out of the $13.1 million, with Betaspring due $2 million and SBLF the remainder.
To avoid holding Slater and Betaspring back, the SBLF has advanced them $1 million of $1.5 million it had planned to lend itself, against their total awards.
The federal grant was divided into three installments and to receive each, the state has to have used 80 percent of the previous one.