Gov. M. Jodi Rell unveiled steps last week aimed at keeping loans flowing from community banks to small businesses.
Under the initiative, Connecticut banks may contribute $1 million each to a loan pool that small businesses can draw on.
After emerging from an hour-long closed-door meeting with state banking executives and regulators Oct. 9, Rell outlined the program and issued assurances that community banks in the state remain relatively strong. She said they were not having the same degree of problems that larger national banks were having.
While Rell painted a bleak outlook for the national economy, she said the economic situation in Connecticut was not as severe as in other parts of the country. She said credit remains available to small businesses and individuals seeking loans.
Rell called for the meeting with local bankers to discuss the state’s current economic situation and to unveil a five-point plan aimed at ensuring credit remains “readily available to small businesses.”
Relatively Healthy
“In Connecticut we have been able to keep our economy relatively healthy compared to other states,” Rell said. “Our banks are strong and are lending money.”
The Republican governor also acknowledged that the state has a $300 million budget deficit. State Comptroller Nancy Wyman has said the deficit figure for fiscal year 2009 will be closer to $800 million.
The plan unveiled by Rell asks community banks in the state to contribute $1 million each to a lending pool that will be available for small businesses. It also calls for Connecticut’s Direct Loan to Small Business Program to allocate $5 million to provide low-interest loans to small businesses in key economic sectors such as aerospace, medical devices and alternative energy.
Those loans will be targeted to companies that have 50 employees or less and will assist them in job retention.
Rell requested that the Connecticut Development Authority enhance its Urban Loan Guarantee Program by $10 million. Those loans will be initially targeted at businesses with 50 to 200 employees.
Rell is also asking the legislature to extend the Bond Anticipation Note program. In 2000, use of Bond Anticipation Notes was extended from four years to eight years, so many of these notes are coming due in 2008 and 2009.
Bridging Shortfalls
Extending the program would enable municipalities to bridge revenue shortfalls caused by difficulties they currently face in selling bond issues, Rell said.
Bankers who attended the meeting said that their banks remain sound because they didn’t participate in sub-prime lending.
“We have no foreclosed property that we own,” said Bill McGurk, president and CEO of Rockville Bank. McGurk said community banks have learned their lesson from the savings and loan crisis which hit the state hard in the late 1980s and early 1990s.
Since then, Connecticut banks have become more responsible with their lending standards, he said.
