PROVIDENCE – Gov. Donald L. Carcieri and state economic development officials today proposed a stimulus package that includes more than $200 million in loans and loan guarantees to raise capital for small businesses caught in the credit crunch. State officials intend to have parts of the package in place as soon as Jan. 1.

“Getting capital into the marketplace and helping strong companies grow is one of the most important things we can do to turn the tide and get Rhode Islanders back to work,” Carcieri said during this morning’s 10:30 news conference at the R.I. State House. “We know the need is urgent, and we are prepared to work aggressively to put the stimulus plan into action and get this new capital flowing.”

In October – the latest month for which state unemployment figures are available – Rhode Island tied unemployment rate of 9.3 percent tied Michigan for the nation’s highest jobless rate of 9.3 percent. (READ MORE) And since then, the national jobless rate has climbed 0.2 percentage points to a 34-year high of 6.7 percent. (READ MORE)

The small business community represents 90 percent of the businesses in the state, the governor noted, and employs 25 percent of the Ocean State work force.

The new economic stimulus package calls for the expenditure of no tax revenue, state officials noted. Rhode Island will, however, take on an obligation to guarantee some business loans, and it will reinstitute a tax credit whose fiscal impact officials said should be a wash, due to the new jobs they expect to be created.

General Assembly approval is required for some parts of the package, and officials said they hope to obtain that approval as soon as the legislature convenes in January.

“Access to capital is the lifeline of small business, and the steps that are being taken today will provide an additional mechanism needed to prime our economic engine,” said Mark S. Hayward, Rhode Island district director of the U.S. Small Business Administration (SBA). “The added guarantee from the State of Rhode Island will enhance the likelihood that participating lenders will provide much-needed short- and long-term credit to the small business community.”

According to J. Michael Saul, newly named interim executive director of the R.I. Economic Development Corporation (EDC), and Fred S. Hashway Jr., director of government affairs for the EDC, the six-point plan consists of the following elements:

• Eight banks have committed to lending $165 million to small and mid-sized businesses over the next two years, starting immediately. The banks will issue formal quarterly reports to the EDC, which will monitor the progress of this initiative.

The eight financial institutions and the sums they will lend are: BankNewport, $25 million; Bank Rhode Island, $25 million; Citizens Bank, $25 million; Coastway Credit Union, $25 million; Webster Bank, $25 million; The Washington Trust Co., $20 million; Randolph Savings Bank, $15 million; and Navigant Credit Union, $5 million.

Only two of the banks are based outside Rhode Island: Randolph is based in Stoughton, Mass., but has a Coventry office; Webster is based in Swansea, but has several branches in Rhode Island.

• Recapitalization of the EDC-managed R.I. Small Business Loan Fund (SBLF) to include at least $2 million from local banks and credit unions, supplemented by a $5 million grant the EDC is seeking from the U.S. Department of Commerce. The EDC would issue direct loans to businesses in need of, for instance, working capital or equipment.

• Expansion of the SBLF micro-loan program, which lends amounts of less than $50,000 to companies with 10 or fewer employees, the smallest of small businesses. Initially, $700,000 will be taken from the SBLF to expand this program.

• Partnering with the SBA, the state would commit $25 million to help guarantee loans that businesses take out under SBA loan programs: For loans up to $2 million, the SBA already guarantees 75 percent, and the state would guarantee another 15 percent. For loans up to $150,000, the SBA backs 50 percent, and the state would guarantee another 40 percent.

The EDC also could make direct loans to businesses without the SBA under this provision, officials said.

The state guarantees would allow lending institutions “to be more patient and flexible,” Saul said. General Assembly approval would be needed, he acknowledged. But Saul said the governor has spoken to legislative leaders and “they have given us a favorable response.”

• The state small business tax credit would be reinstated, allowing businesses to write off the cost of fees on SBA loans.

Legislative approval would be required for this step, as well.

• The Business Development Company of Rhode Island (BDCRI), a non-bank lender based in Providence that provides debt and equity financing to business, will make $5 million available for gap financing. Such interim loans “typically are needed for companies that are growing,” Saul said. They can provide the vital capital needed during an acquisition, for instance.

Formation of the stimulus package came after the governor held a series of meetings with small business owners, the banking community and state economic development officials.

Saul and Hashway told the Providence Business News that more components or additional funding may be added to the package in the near future. “We will continue the dialogue,” Hashway said. “This is a partnership of Rhode Islanders, and we’ve got to do this together.”

The R.I. Economic Development Corporation is a quasi-public agency established to undertake port projects and promote business development, preservation and expansion in the state. To learn more about the EDC and its programs – including the Small Business Loan Fund – visit www.riedc.com.

News and information from the R.I. Governor’s Office – including video recordings from the Nov. 6 Governor’s Forum on the Rhode Island Economy – are available at www.governor.ri.gov.