Monday, October 11, 2010
A new federal law offers Mississippi up to $13.2 million to support small-business lending programs through community banks. The State Small Business Credit Initiative, part of the Small Business Jobs Act that President Barack Obama signed Sept. 27, dedicates $1.5 billion in federal funds to expand existing state-level programs that extend credit to small businesses.
The U.S. Treasury Department announced last week that Mississippi is eligible for up to $13,168,350 through the initiative. The provision requires states to demonstrate that each dollar of federal funds generates $10 of new private lending, meaning that Mississippi's full allocation could produce up to $131 million in loans to small businesses.
States can use the funds to support a variety of lending programs, including loan guarantees; capital access programs, which encourage otherwise timid lenders to extend credit; and collateral support programs that supplement the collateral that small manufacturers need to secure loans.
Ron Aldridge, Mississippi state director for the National Federation of Independent Business, said that many small businesses are struggling to find credit because the economy has led them to reduce their own assets.
"If companies have reduced their inventory to keep their costs down, (they) aren't going to have assets to back up that loan," Aldridge said.
Jackson Chamber of Commerce President Jonathan Lee hopes the lending program can free up credit, not only for his own company, Mississippi Products, but also for the vendors that his company uses. With credit tight, vendors have less freedom to offer credit themselves, he said.
"When we go to buy items from other vendors, other small businesses, typically they've got you on a credit limit," Lee said. "If they don't have the capacity, they make their limits small as well."
States must apply to receive funding through the credit initiative, and state plans are subject to U.S. Treasury Department's approval. Dan Turner, spokesman for Gov. Haley Barbour, said he had not spoken to the governor and did not know whether he planned to apply for the funds.