Equipment loans for manufacturers

Manufacturers could apply for low-interest loans from the state to help pay for new equipment, under a bill approved by a House division.

Sponsored by Rep. Tom Rukavina (DFL-Virginia),  HF3037 would establish a manufacturing equipment loan program within the Department of Employment and Economic Development. The loans could cover up to 50 percent of the cost of the new equipment, and would allow for a grace period of up to two years before payments are due.

The House Higher Education and Workforce Development Finance and Policy Division approved the bill March 9 and referred it to the House Finance Committee, with a recommendation that it be sent to the House Capital Investment Finance Division.

The program would be administered by DEED and funded through the sale of revenue bonds. Rukavina said it would be a way to bring back some manufacturing jobs lost during the recent downturn “without bankrupting the state.”

“My experience with some of the businesses in my district right now … is they’re very, very nervous about the fact that they’re barely hanging on and they can’t get capital anywhere,” Rukavina said.

As evidence, Rukavina cited testimony from a House Jobs Task Force hearing last fall in which a small business owner said he could expand his company and hire new workers if he could get a loan for new equipment. The owner said he couldn’t get a loan because tight credit markets had stifled lending by banks.

Rep. Rob Eastlund (R-Isanti) said that while the overall concept has “some merit,” he is concerned businesses that would otherwise qualify for private financing from banks would use the state program just to get the lower interest rate.

“My sense here is that this is going to be issued at a rate lower than the marketplace,” Eastlund said. He suggested the bill include criteria that would limit the use of the program to only those companies that can’t access private capital.

The bill has no Senate companion.