DECD readies $15M loan fund

With the close of the 2010 legislative session, the Connecticut Department of Economic and Community Development will create a “Connecticut Credit Consortium” in an attempt to free up loans for small business.

Under a new law intended to create jobs in Connecticut, the state is offering loans of up to $500,000 to small businesses. It is only the latest attempt by the state to move the needle on loans, after Gov. M. Jodi Rell asked banks in 2008 to contribute $60 million to a $100 million loan pool focused on small businesses, and floated the idea earlier this year of a $500 million pool underwritten largely by banks.

At deadline, DECD Commissioner Joan McDonald had yet to publish eligibility criteria and guidelines for the new program, which caps total lending at $15 million. In addition to small businesses with fewer than 50 employees, nonprofit organizations are also eligible to apply for loans.

The bill contains another of other provisions, including tax credits for “angel” investments in technology and life-science startups.

Both the budget and the jobs bill represented a rare instance of cooperation between Republican Gov. M. Jodi Rell and the Democrat-dominated Connecticut General Assembly, as Rell readies for her final months in office.

“This may very well be the most important bill ”“ other than the budget ”“ we passed all year,” Rell said, in a prepared statement. “All of us agreed there were really only two priorities this year ”“ the budget and jobs. We passed a budget, on time, for the first time in four years. And ”¦ we celebrate the centerpiece of a number of jobs bills that address issue No. 1 for the people of our state: keeping and growing jobs.”

The bill also creates a tax credit for small businesses that hire employees, equal to $200 per month for each worker brought onboard. The law authorizes the state to issue up to $11 million in tax credits in a fiscal year; limited liability companies and partnerships are eligible, including those that file taxes using individual forms.

In its first-quarter survey of credit conditions published by the Connecticut Business & Industry Association and TD Bank, 44 percent of businesspeople polled said they expect credit conditions to worsen over the subsequent three-to-six months, while just 10 percent expected them to improve.

It was a remarkably dour outlook, considering just 17 percent of businesspeople surveyed by CBIA expect business conditions to deteriorate.

In its periodic assessment of the Tri-state economy, the Federal Reserve Bank of New York similarly noted a further tightening of commercial credit, as well as reduced demand for loans.

“We are finally starting to see some positive signs in our surveys,” said Peter Gioia, CBIA vice president and economist, following the organization”™s business conditions survey. “The economy has been growing slowly for a few months now, and this survey shows that business executives are experiencing improvements and are optimistic about their firms and the future.”

While CBIA and other business groups have blasted lawmakers in previous years over new burdens placed on companies, there was little to nitpick in the just-finished session. The state government elected not to close the budget gap through new corporate taxes as it had in previous recessions.