Ask Ginger Siegel whether she sees as necessary Gov. M. Jodi Rell”™s proposal for a $500 million small-business lending pool, and the Webster Financial Corp. manager responds she does not ”“ but she welcomes the move nonetheless.
Some 16 months after Rell shamed Connecticut banks into creating a $100 million loan pool for small businesses, the governor hopes to create a new fund five times that size on reports small businesses are still having trouble getting loans.
Rell called for Connecticut to work with banks to create a $500 million fund to boost lending to small businesses, as part of her “state of the state” speech delivered in Hartford. In his own State of the Union address, President Obama proposed the federal government redirect bailout repayments to small businesses through a range of loan and grant programs.
“The most critical problem facing businesses today ”“ particularly the small and medium businesses that are our main engines of growth ”“ is credit availability,” Rell said, in prepared remarks. “Employers need loans and financing to buy equipment and inventory, expand space or just to meet daily cash flow demands. As we all know, the credit crunch has crippled a great many employers. Financing that was readily available in years past is difficult, if not impossible, to find. This is a national problem, but we need to find a Connecticut solution to it.”
Rell said the state could contribute $100 million by canceling old bond authorizations that were never executed, and said she expected banks to contribute the balance of $400 million. Rell did not immediately state whether banks have said they will go along with the proposal, and her administration is working with the Connecticut Banking Association to craft a plan.
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Coming off a profitable 2009, large corporations appear to be having less difficulty obtaining credit on favorable terms.
“We (have been) accessing the commercial paper market with ease right through the credit crisis, and paying rates below half percent,” said Jim Sawyer, chief financial officer of Praxair, in a conference call with investment analysts in late January. “We saw opportunities in the bond market to lock in lower rates for long-term ”“ we did that.”
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In a quarterly poll published by the Connecticut Business & Industry Association and TD Bank, however, small and mid-sized businesses in the state continue to bemoan what they perceive as tight credit. In an address last month to the Business Council of Fairfield County, an economist with the Federal Reserve Bank of New York said what businesses are really witnessing is a return to the credit standards prevalent five years ago before a bubble mentality overtook businesses and banks alike.
As senior vice president in charge of business banking at Waterbury-based Webster Financial, Siegel said many small-business owners are still interested in securing lines of credit that allow them to simply make interest payments on their debt, with banks more interested in defined-term loans that require those businesses to pay down the principle as well.
Her company recently announced it would nearly double its business lending this year to $850 million.
“I believe that financing at this point in time is not impossible to find,” Siegel said. “If I am the right kind of banker, I am going to put them into a term loan.”
Siegel said she supported the governor”™s proposed loan pool, even if she thought it may be superfluous.
“It”™s a vote of confidence,” Siegel said. “It”™s saying to people out there, ”˜We are working together to find a solution.”™”
The governor also proposed allowing businesses with fewer than 25 employees to take advantage of a little-used tax credit for creating jobs. Under her proposal, an employer could take a tax credit of $2,500 annually for three years for each job created, including for employers that file taxes using personal income tax forms. Rell estimated the tax credit could help create 4,000 jobs in Connecticut in the first year alone.
Rell also touted a proposed loan-forgiveness program for college students who stay in Connecticut after getting degrees or certificates in green technology, life sciences and health information technology. Bachelor”™s degree holders would receive an annual $2,500 benefit for four years, while associate”™s degree would receive the same amount for two years.
