The Winston-Salem Journal reports that North Carolina’s small-business community has gained a $46.1 million economic shot-in-the-arm from the federal government. North Carolina and Michigan are the first states to qualify for $1.5 billion in federal money from the Small Business Jobs Act of 2010.
The program will provide loans to small businesses and manufacturers “that are creditworthy but are not getting the loans they need to expand and create jobs,” the U.S. Treasury Department said. The funds will be channeled through the N.C. Capital Access program of the N.C. Rural Economic Development Center. It already has secured 30 lending participants.
Businesses with 500 or fewer employees are eligible for loans, with a maximum loan amount of $5 million. The loans may be used to finance the buying of land, the construction or renovation of buildings, the purchase of equipment, and working capital. The goal is providing loans with flexible terms, minimal additional paperwork and quick turnaround, with money expected to be available by Jan. 31. For more information, call (800) 228-8443.
The loans are likely to be generated primarily through community banks, according to the N.C. governor’s office.
“Everywhere I go, I talk to small-business owners that are concerned about the access to credit,” said Keith Crisco, the state’s commerce secretary. “From my own experience, I know that for small businesses, credit is the key to sustainability, growth and profits.”
North Carolina qualified early in part because it was able to prove it could leverage the $46.1 million by at least a 10-to-1 ratio in private lending. Between 1994 and 2008, the N.C. Capital Access program helped lending institutions make 1,850 small-business loans totaling more than $103 million. It is credited for helping save or create more than 27,000 jobs.
Tony Plath, a finance professor at UNC Charlotte, said he believes the program will draw applications from borrowers with “reasonable, but not pristine, levels of credit risk. It’s not the absence of funds for loans in the banks that’s missing in this market — the banks have plenty of money to lend,” Plath said. “It’s the unwillingness of lenders to accept anything other than the highest-quality borrowers. “Given its federal guarantee of small-business credit risk, this will stimulate both borrower-loan applications and lender-approval rates to help get credit and jobs flowing again.” Read More.