PROVIDENCE – The state will put together a “package” to help small businesses gain access to credit, Gov. Donald L. Carcieri said this afternoon, after meeting behind closed doors with business owners and other representatives of the state’s small business community. He gave no specifics of the tentative plan.

“We see a real tightening going on in credit,” and small business owners are worried because “they have been told they no longer have credit available to them,” Carcieri told the Statehouse news conference.

“I won’t get into specifics, but we talked about ideas that could help,” the governor said of the morning’s two-hour closed session. “Some excellent ideas came out of this. We need the private sector involved, and we need to spend a few days to flush out our ideas, and this may require going to the General Assembly.”

The next step, Carcieri said, will see state officials meeting with local lenders, as soon as next week, to hear their side of the story. Although the lenders say they are open for lending business as usual, that is “not what we’re hearing” from the small business community, the governor added.

So far, none of the state’s “major employers” has had “major layoffs,” and the state wants to make sure the situation is “not exacerbated” to the point where those larger businesses also feel the pinch, Carcieri said.

But small- and medium-sized businesses make up more than 90 percent of the state’s economy and generate most jobs in the state, the governor added. And it is such smaller businesses that have been most affected by the credit crunch.

“Small businesses work on cash. Cash is critical to them to continue on,” said Mark S. Hayward, Rhode Island District director for the U.S. Small Business Administration (SBA), which recently joined its partners in launching a credit-crisis hotline to advise local entrepreneurs. (READ MORE) “We’re not saying no one is lending, but there is a severe restriction of capital,” he said.

So far in the federal fiscal year that started Oct. 1, SBA lenders have made just nine loans in Rhode Island, Hayward said, compared to 20 during the same time period last year and 47 in the fiscal year before.

“Our economy is extremely susceptible to the real estate boom and bust,” Carcieri noted. During the real estate bust of 1989-1990, he said, the state lost a total of about 40,000 jobs and unemployment climbed to about 9 percent – slightly more than the 8.8 percent Rhode Island registered last month, when it had the highest jobless rate of any state in the nation. (READ MORE) In recent months, he added, Rhode Island has lost about 16,000 jobs, most of them at small- and medium-sized firms.

The effects of the credit crunch are “widespread” throughout the state, said Saul Kaplan, executive director of the R.I. Economic Development Corporation (EDC), who like Hayward, also had participated in the closed-door session this morning.

His office has heard from many small businesses that are having a hard time keeping the credit they have, and others that have lost their lines of credit, Kaplan said. The state’s goal, he added, is to shape “very specific” solutions.

Hayward said after the news conference that he expects state officials will want to meet with the lending institutions that participate in local SBA programs – about 30 banks in all.

The governor’s office already is in the process of organizing an economic summit for Nov. 6, when Carcieri intends to bring in national experts to talk about the state of the economy in Rhode Island. The small business credit crunch and the state’s initiative to prepare an assistance program will be topics of the Nov. 6 discussion, along with the reasons the state’s economy is so dependent on the housing market, Carcieri said.

State officials declined, however, to estimate when details of the small business assistance package might become available for public review.

For more information about the U.S. Small Business Administration and its programs, call the SBA’s Rhode Island district office at 528-4561 or visit www.sba.gov. News and information from the R.I. Governor’s Office are available at www.governor.ri.gov.