The Department of Economic and Community Development has launched a $150 million lending program targeting small businesses and nonprofits in low-income and historically underserved communities as persistent stress of COVID-19 and new concerns of recession weigh on their minds.
Starting Monday, businesses and nonprofits can apply online for low-interest loans, currently at 4.5%, through the Connecticut Small Business Boost Fund website. Administrators will evaluate applications and match business owners with lenders and community development financial institutions to provide funding and technical support. The state will provide half the funding, $75 million; the other half will come from private partners, including Citizens Bank, M&T Bank and First Republic Bank.
Companies with 100 or fewer employees and annual revenue less than $8 million can apply for loans of up to $500,000. As they pay back the loans, that money will go back into the Boost Fund, perpetuating the program, DECD officials said.
“We realize and remember that it’s small companies that create 90-plus percent of the jobs, and it’s small companies that are part of the community, live in the community, hire in the community, and make a difference,” Gov. Ned Lamont said at a press conference at Schwerdtle, a 143-year-old small manufacturing company in Bridgeport. “In communities, like here in Bridgeport, there’s not a lot of ‘friends-and-family’ money to get to that next stage. We are the friends and family, buddy.”
Lamont said when there’s a risk of recession, traditional banks and lenders often tend to pull back.
“When you have the state coming in alongside of the bank, putting our money and capital at risk alongside them, that gives people confidence,” Lamont said. “And that’s how you get out of recession, continue to grow, continue to expand, make sure that those financial lifelines don’t dry up.”
Mark Muro, a policy analyst with the Brookings Institution, said inflation and angst about a possible recession has cast a “shadow” over the next year or so.
According to a recent survey from Goldman Sachs, 93% of small businesses are concerned about recession coming within the next year.
“In that sense, this kind of counter-cyclical support, especially for under-represented businesses, seems welcome,” he said.
Muro said the businesses targeted by Connecticut’s Boost Fund need help even in good economic times, “so if there is a recession coming, this will provide welcome support.”
The program announced Monday is a revamped and updated version of Small Business Express, a grant and lending program the state administered for roughly a decade. DECD Commissioner David Lehman said the Boost Fund has “a different philosophy and framework,” targeting businesses owned by women and people of color, located in distressed communities.
“Under Small Business Express, we were making loans across the state, and we were competing with banks. We don’t want to do that anymore,” Lehman said. “Secondly, we’re working with the private sector, folks that are experts in making loans. So there’s lots of other people at the table, making that decision. It’s not just the state saying this is a loan we should make.”
The state selected New York-based National Development Council to administer the program. NDC works with a handful of other states on similar programs, but President Daniel Marsh said Connecticut’s Boost Fund will be its largest to date.
NDC has selected a group of new and experienced community development financial institutions, or CDFIs, to help Connecticut businesses and nonprofits with training and advisory services. They include Ascendus, Capital for Change, HEDCO, Pursuit, Southeastern CT Enterprise Region (SeCTer) and NDC’s own Community Impact Loan Fund. Marsh said NDC was planning “an intensive marketing campaign” to reach businesses in the communities Connecticut is targeting.
The program announcement comes just days after the state announced that $120 million in federal funding, from the American Rescue Plan’s State Small Business Credit Initiative, would go toward entrepreneurs from underserved communities pursuing green technology endeavors. Those funds will be administered by the state’s quasi-public venture capital group, Connecticut Innovations. The American Rescue Plan is also providing funding to myriad small business support programs in cities and towns across the state.
While the programs are numerous, with substantial funding committed in each case, Muro said he doesn’t see that as a problem, “especially in these harder-to-serve crevices of the economy.”
Kathy Saint, president of Schwerdtle, said her company benefited from Small Business Express loans, and she plans to apply for assistance under the Boost Fund, too.
“We wouldn’t be where we are if we hadn’t had support from the state,” Saint said. “I’m looking forward to taking advantage of this new program and getting some new toys so that we can be faster, better and be able to compete on a global scale as we have been.”