Small business loan guarantee

A plan to spur lending to small businesses by having the state guarantee certain loans cleared its first committee hurdle April 12.

Rep. Bob Gunther (R-Fairmont) sponsors HF611, which would establish a small business loan guarantee program. His goal is to thaw credit markets that have been frozen during the recent economic crisis.

“Lack of access to capital continues to be a major barrier to growth of small businesses,” he told the House Jobs and Economic Development Finance Committee.

Under the proposal, the state would guarantee up to 70 percent of loans made by qualified gap lenders — organizations that provide subordinate loans in conjunction with larger loans made by commercial financial institutions. The total guarantee amount would be capped at $1.5 million per loan.

One example of a qualified gap lender under the bill’s provisions is the Minnesota Community Capital Fund. Scott Martin, its president and CEO, said the fund helps grow small businesses in Greater Minnesota by giving them leverage to obtain the financing they need.

“We know that with the 70 percent loan guarantee, the money will begin to flow again through us to the business borrowers in Minnesota,” Martin said.

The bill specifies a number of criteria and requirements for businesses to qualify for the program. Basic requirements include having 500 or fewer employees and using the money for specified business purposes exclusively in the state.

The bill would establish a loan guarantee trust fund within the Department of Employment and Economic Development. Its language includes an unspecified appropriation from the General Fund.

Rep. Bev Scalze (DFL-Little Canada) questioned whether there is enough money left in the General Fund to establish the trust fund. Gunther replied that there currently is not, but that he’s hoping to find some.

The committee approved the bill and sent it to the House Commerce and Regulatory Reform Committee. Sen. John Sterling Howe (R-Red Wing) sponsors the companion, SF803, which was laid over for possible omnibus bill inclusion by the Senate Jobs and Economic Growth Committee on March 16.