Federal aid coming to states to help small business: Improving access to credit, promoting exports goal of two new programs
At the end of September, President Obama signed into law the Small Business Jobs Act, which includes more than $1.5 billion for states to cultivate small-business job growth in 2011 and beyond.
One of the top priorities for the region’s legislatures in 2011 will be finding ways to foster job creation during a period of economic uncertainty and limited resources for state government.
Gone will be the federal stimulus funds that over the past two years have, at the least, helped save some jobs and close budget gaps.
There will, however, be some new federal assistance coming to the states in 2011 — albeit on a much smaller scale.
At the end of September, President Obama signed into law the Small Business Jobs Act, which includes more than $1.5 billion for states to cultivate small-business job growth.
How crucial is this sector to the overall economic recovery of states?
Data on jobs in the Midwest underscore the importance of small businesses: Almost 75 percent of the region’s workforce is employed in establishments with fewer than 100 employees, and almost 90 percent is employed by establishments with fewer than 500 employees.
The new federal law creates two new programs to help small businesses grow.
The first program, the State Small Business Credit Initiative, aims to help local entrepreneurs secure the credit they need to expand operations. States had to file notices of intent to apply for formula grant funds by the end of November (all Midwestern states except North Dakota applied); those states must submit applications to the U.S. Treasury by June 26.
The new initiative will allow states to expand their existing small-business lending programs or create new ones. Common existing programs include loan guarantees (the state provides partial guarantees on certain small-business loans) and capital access programs (the state matches the combined up-front premium paid by the bank and borrower into a reserve fund).
The second program created under the act is the State Trade and Export Promotion Grant Program. The goal of his three-year, $90 million initiative is to increase the number of small businesses exporting products to other countries. Grants will be awarded to states on a competitive basis.
Details of the application process and program structure will be finalized in a Small Business Administration report due to the U.S. Congress by Jan. 25. However, one guideline already has been set:
The 10 states with the highest percentage of exporters that are small businesses may not receive more than 40 percent of total funding. Ohio and Michigan are among these 10 states.