Small businesses got a whiff of relief last week when Gov. David A. Paterson proposed a loan program among several other remedies for the tough economic climate.
The proposed small business revolving loan fund would come at a critical time as bank loans are difficult to obtain or very expensive for small business owners, say entrepreneurs and state economic development officials.
"Access to capital for small businesses is absolutely critical," said Dennis Mullen, president and chief executive of the Empire State Development Corp., the state's economic development agency. ". . . The need is greater than the funding level we are proposing, but the governor is saying let's start here, get out in the marketplace and do the evaluation."
The program, which needs legislative approval, would be similar to the existing Long Island Targeted Revolving Loan Fund but greatly expands the types of small businesses that would be eligible and would allow businesses to use the loans for operating expenses or payroll.
"In the absence of conventional bank lending, which we have all been suffering with, they are a port in the storm," said Anita Bowra, president and owner of Gentry Manufacturing Corp. in Ronkonkoma, speaking of the loans.
Bowra's company, which produces replacement parts for mailing and other types of industrial machines, received a $70,000 loan with a 5 percent interest rate last year with the help of the Long Island Development Corp., which administers the Long Island loan fund. The money allowed her to make improvements to one of her machines and increase its production capability.
The Long Island revolving loan fund, which has provided almost 100 loans totaling $15 million, targets businesses in manufacturing sectors that include electronics, biomedical, medical devices and the commercial fishing industry as well as certified women- and minority-owned firms and companies in special development zones. The new fund would add retailers, mom-and-pop businesses and, under certain conditions, startups to the list.
Another feature benefiting many small businesses would be the availability of smaller loans than exist under programs now.
"In terms of your typical mom and pops there is a need for money because the smaller the loan the less profit the bank makes, especially if it's not a super stellar credit situation," said Roslyn Goldmacher, president and chief executive of the Bethpage-based Long Island Development Corp., which administers the existing Long Island Targeted Revolving Loan Fund.
Although there seems to be some thawing in commercial lending for large companies, lending for small businesses, which often finance their operations using credit cards, "is still frozen solid," said Ken Adams, president and chief executive of the Business Council of New York State.
But while the concept may be compelling, some legislators say it doesn't address the larger problems facing businesses. "I will say that a fund like that, in principle, could help small businesses, but we need to address the real problem of overspending and high taxes, which is driving businesses out of New York State," said state Sen. Charles Fuschillo (R-Merrick), who said he hasn't seen the proposal yet.