State subsidizing rate on small-business loans

The program offers small businesses a 3 percent reduction on loan rates.

By DON SHILLING

VINDICATOR BUSINESS EDITOR

YOUNGSTOWN — State Treasurer Richard Cordray is looking for small business owners who need a good deal on a loan.

He is in the process of revitalizing a program that gives small businesses a 3 percent reduction on bank loan rates.

Roger Geiger, Ohio executive director for the National Federation of Independent Businesses, said the program is such a good deal for his members that he has joined Cordray on a media tour to promote it. They visited The Vindicator on Tuesday as part of a 12-city tour.

If a bank is offering a business a loan based on the prime rate of 6 percent, the state program would reduce that rate to 3 percent. On a maximum loan of $400,000, the interest rate savings would be $12,000 a year.

Geiger said the lower interest rate allows businesses to put more money into the projects, perhaps buying more equipment or hiring more workers.

Cordray said the program was created 25 years ago but had languished for about 10 years. When he took office last year, it was barely active.

To reinvigorate the program, he hired Amanda Hoyt as investment coordinator and ordered an overhaul in marketing.

The name of the program was changed from Ohio Small Business Linked Deposit to GrowNOW, and staff has been meeting with banks to explain the program.

The online application can be completed in 30 minutes at www.grownow.ohio.gov. Eligible businesses must have less than 150 employees.

Hoyt said that 120 businesses were part of the program when she was hired but that has been increased to 400.

Still, there is room for more. She said she hopes to eventually reach 1,200 loans a year.

Under state law, the treasurer’s office can put $250 million a year in the program. There now is about $90 million in loans that have been authorized but only about $60 million that has been loaned.

State law provides that 12 percent of the treasurer’s main investment funds can be directed to the small business loan program. The money is revenue that has been collected but not spent and comes from tax collections, bonds and federal sources.

The banks involved actually make the loans and assume their risks. The state is subsidizing the interest rate.

When a bank makes a loan under the program, the state agrees to buy a certificate of deposit with that bank as an investment of state funds. The interest rate is reduced by 3 percent, and then the bank passes along that reduction on its loan to the small business.

Geiger said the rate reduction the state receives on its investment is a good deal for taxpayers. Businesses that benefit from the lower interest rates are using that money to create more income taxes and other business taxes, he said.

shilling@vindy.com