By Denise Perreault
PBN Staff Writer
(Updated, 11:30 a.m.)
PROVIDENCE – As part of the newly-enacted Small Business Jobs Act, U.S. Sen. Jack Reed, D-R.I., announced Friday that Rhode Island is eligible to receive $13.1 million to help restore the flow of credit to small businesses and manufacturers.
“This federal funding will help unlock credit, connect more entrepreneurs with lenders and help more small businesses grow and create jobs,” Reed said. He noted that the funding can be leveraged to pump more than $130 million into the state’s economy.
The Small Business Jobs Act, enacted at the end of September, created the State Small Business Credit Initiative which totals $1.5 billion in grants for states to support small business lending.
States must apply for the funds within the next nine months and the money must be used for approved programs that leverage private lenders to extend greater credit to small businesses and manufacturers, according to a synopsis of the new law provided by Reed’s office. Recipients must demonstrate a “bang for the buck” of at least $10 in private lending for every $1 in federal funding, Reed said.
The funds allow states to build on successful programs in such areas as capital access, loan participation, collateral support, state-run venture capital and credit guarantees. Funds will be allocated to the states based on certain employment and unemployment data. If the state does not apply, the largest municipalities in the state can do so, the law says.
Reed’s office explained that the most likely state entity to apply for the funding would be the R.I. Economic Development Corporation, which must submit a plan to the U.S. Department of the Treasury. If the plan is approved, the state would receive the funds in one-third increments. The state could choose to administer the loan program itself or contract with another agency to do so, Reed’s office said.
Small business loans are limited to firms with fewer than 500 employees and the maximum loan size would be $5 million, according to Reed’s office.