Nearly three dozen Connecticut companies lined up last week to praise the state’s Small Business Express loan program. But unless the legislature finds some new money to keep the program running, they may be among the last to benefit.
Money for Gov. Dannel P. Malloy’s key $100 million economic development initiative is scheduled to run out this summer, leaving a tough decision for lawmakers on whether or not to extend the program as the state faces significant budget deficits.
Catherine Smith, who is the commissioner of the Department of Economic and Community Development, said she plans to ask the state legislature, which reconvenes this week, for an additional $50 million to $100 million in funding to extend the Small Business Express program for a few more years.
The program was created in late 2011 and was part of the jobs bill passed by lawmakers during the special legislative session that October. It provides $100 million in loans, forgivable loans or matching grants to Connecticut-based small businesses with fewer than 100 employees that pledge to add jobs in the state and/or invest capital in infrastructure expansions.
So far, just over 1,600 applications have been received by the Department of Economic and Community Development (DECD), and 494 businesses have received a total of $67.2 million in grants and loans, Smith said.
Meanwhile, there are 271 applications in final review. If approved, those applicants would eat up the remaining approximately $38 million in funding for the program, which is also extracting funds from the Manufacturing Assistance Act.
Funds for the program could run out by the second or third quarter this year, Smith said, adding that she is working with Malloy’s office on a proposal to the legislature that would add additional funds for the program.
Originally, the Small Business Express program allocated $50 million per year, over a two-year period. Smith said she may ask for a similar funding allocation to extend the program, which has been used by Malloy as a way to support small businesses.
Malloy and previous Connecticut governors have been criticized for ignoring the needs of small businesses in favor of providing economic development incentives to larger corporations instead.
The Small Business Express program was Malloy’s way of reaching out to smaller businesses in the state, which Malloy says will serve as a major growth engine for the economy.
“Jobs are created in small businesses, especially new businesses,” Malloy said. “During the upcoming session, we will ask for more support. We can’t pull back on our strategy to help small business.”
Any request for additional funding will likely face scrutiny as lawmakers will be dealing with billion-dollar deficits for the next two fiscal years.
The upcoming legislative session, which begins Jan. 9, is a budget year, meaning Malloy and the House and Senate will have to approve spending plans for the next two fiscal years. The state is already estimated to be in the red by just over $1 billion in each of those fiscal years.
Meanwhile, Malloy and the General Assembly have already had to make more than $300 million in spending cuts to close an estimated $365 million to $410 million budget shortfall for the current fiscal year.
Although the October 2011 jobs bill received overwhelming bipartisan support, some resistance could emerge for providing more funding to the Small Business Express program as other areas of the state budget get cut.
At the same time, lawmakers face pressure to find ways to spur more job creation in the state, which has an unemployment rate of 8.8 percent, well above the national unemployment rate of 7.7 percent.
Malloy and Smith invited to Hartford last week about 30 Connecticut companies that received Small Business Express loans or grants. Companies that have received funding from the program run the gamut from restaurants, butcher shops, fitness centers and solar companies to plastic manufacturers and construction companies.
All the business owners praised the program for helping them invest in their plants and facilities and helping them add new workers. Few had any complaints about the program, however, concerns were raised about legal fees and closing costs associated with finalizing agreements.
