News Column

Federal fund sparks Alabama business growth

July 12, 2014

By Brad Harper, Montgomery Advertiser, Ala.



July 12--Business is cooking at Casa Napoli a year after the owners of the restaurant took out a loan to expand.

They used the money to buy a bigger building a few miles away. Since then, profits have more than doubled and they've hired more people.

"Oh, gosh, no -- without the loan, we wouldn't have been able to move," co-owner Charlene Finkelstein said. "We outgrew the old building, and the loan made it all possible."

A federal loan program has paid off for many of the state's small businesses, including the Wetumpka eatery.

Alabama got $31,301,498 in federal funds in 2011 to help pave the way for more small business loans. That was the eighth highest total among all states, partly because of the level of poverty here.

The money is used not for the actual loans, but to guarantee up to 50 percent of a total loan amount in case of default. That makes it easier for banks to say yes to more small businesses.

Once the business owner pays back the loan, the money rolls back into the pool to be used to guarantee other Alabama loans.

That fund, called the State Small Business Credit Initiative, has been in demand here. In less than three years, the state has allocated $28.8 million from the fund to back 112 Alabama loans. That's the seventh most in the nation.

The Alabama Department of Economic and Community Affairs administers the money, partnering with banks on individual loans.

"Small businesses are a vital part of Alabama's economy," ADECA Director Jim Byard Jr. said. "Through a public-private partnership, our credit initiative is providing business owners with the capital they need to grow and prosper."

The average Alabama SSBCI loan is about $594,000, according to the Treasury Department.

The fund was created as part of the Small Business Jobs Act in 2010 and has deployed more than $1 billion nationwide since then.

President Barack Obama has proposed an extension of the program in his 2015 budget with another $1.5 billion in funding.

Since the money doesn't return to the federal level after loans are repaid, the SSBCI pool is expected to keep growing. To date, states have reported recycling more than $14.7 million.

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(c)2014 the Montgomery Advertiser (Montgomery, Ala.)

Visit the Montgomery Advertiser (Montgomery, Ala.) at www.montgomeryadvertiser.com

Distributed by MCT Information Services


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Source: Montgomery Advertiser (AL)


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