Gov. Donald Carcieri recently unveiled the six-point package, which includes an infusion of capital into the state's small business loan fund, a state-backed loan guarantee program. One component is a $165,000 pledge from Coastway CU, Navigant CU, Bank Newport, Citizens Banks, Randolph Savings Bank, Washington Trust and Webster Bank to make new loans. All have agreed to report loan activity to the Rhode Island Economic Development Corp. The pledge will take effect immediately and the Rhode Island Economic Development Corp. will begin monitoring lending activity on Jan. 1, 2009.
The second component is a recapitalization of Rhode Island's small business loan fund. In 2008, RIEDC's small business loan fund issued 16 loans totaling $4.4 million to small and mid-sized businesses, which created more than 500 jobs. Because of the demand, the fund now lacks sufficient liquidity to expand the program, according to Carcieri's office. The governor has crafted a plan to give approximately $7 million to Rhode Island's SBLF, restoring the program's ability to make new loans. Approximately $2.4 million has been committed to date, including $200,000 each from Coastway CU and Navigant CU. An additional $5 million grant from the U.S. Economic Development Administration has also been requested.
The small business stimulus package also includes expansion of the state's micro-loan program with 10% of new money directed to the SBLF earmarked for loans less than $50,000. The governor has also sought to reinstate a tax credit that enables qualifying small businesses to take a tax credit against their Rhode Island state filing for guarantee fees paid to the SBA.
As part of the revitalization plan, Carcieri has also asked the state legislature to authorize approval to support the creation of a $25 million loan guarantee program. The loan guarantee program will be used primarily to augment guarantees currently offered by the SBA. It may also provide guarantees for qualifying direct small business bank loans for those businesses not eligible for SBA backed loans. The program will provide an additional 15% guarantee on SBA 7(a) loans and 40% on SBA express loans. Guarantees issued on SBA loans are not to exceed $200,000. The program will provide up to a 90% guarantee on direct bank loans. Direct loan guarantees are not to exceed $500,000.
Finally, the Business Development Co. of Rhode Island is prepared to commit up to $5,000,000 in gap financing to Rhode Island businesses that may need more funding than their senior lenders are willing to extend, according to Carcieri. Financing from BDCRI, a nonbank lender that provides debt and equity financing to "promising" yet undercapitalized companies in Rhode Island, Connecticut and Massachusetts, will be subordinated debt and is considered capital by senior lenders. BDCRI's member banks have invested the majority share of the $10.5 million that the lender has available to lend.