SMALL BUSINESS LOAN GUARANTEE PROGRAM

Representative Warren Petryk, Representative Kathy Bernier, and I are introducing legislation that will make it easier for small businesses to receive loans from the Wisconsin Housing and Economic Development Authority (WHEDA). WHEDA operates several programs established by the Legislature that guarantee loans made by private lenders to qualified businesses. In 1991, the Wisconsin Development Reserve Fund was created to back the loan guarantees. WHEDA programs are not fundamentally supported by tax dollars. Rather, proceeds from the sale of revenue bonds help fund the loan guarantee programs which are established to boost economic development in Wisconsin.

Assembly Bill 294 brings the small business loan guarantee program statewide. This gives more people the opportunity to start a new business or expand an existing one and create jobs. Loosening the restrictions on eligibility will help small business owners who want to expand or start a new business have the flexibility to do so.

Specifically, this bill makes the following changes to the program:

1. The cap on the amount of a loan that may be guaranteed under the program
is raised from $200,000, or 80 percent of the principal of the loan, to $500,000, or 80
percent of the principal of the loan.

2. The definition of "small business" is expanded from businesses that employ
up to 50 full-time employees to businesses that employ up to 250 full-time
employees.

3. To open up the program to a wider range of people, the requirement that the owner of a small business be actively engaged in the small business in order to qualify for the program is deleted.

4. Assembly Bill 294 also brings the program statewide. The permitted use of proceeds of a loan for the start-up of a small business in a vacant storefront in a downtown area is expanded to apply to a community of any size by removing the limitation to rural communities.

Next Wednesday, the Committee on Rural Economic Development and Rural Affairs, which I am on, is having a hearing on this bill. Assembly Bill 294 allows established small businesses looking to expand or start up small businesses to benefit from more flexibility and less job-stifling red tape. I think expanding the program will give more community members the opportunity to create jobs at the local level.