(The Center Square) – North Carolina legislature has proposed a bill that would pour $ 25 million into a loan program to help small businesses in the aftermath of the COVID-19 pandemic response.
Members of the House Select Committee on Covid-19’s Economic Support Working Group on Tuesday discussed a proposal that would allocate state funding for the Quick Loan program to a local nonprofit to help small businesses while they await federal aid.
The Golden LEAF Foundation, an organization that supports rural and tobacco communities, launched a COVID-19 loan program on March 24th. As of Monday, the foundation had granted $ 4.1 million in loans to 116 applicants.
The proposal’s sponsors hope the additional funding will help the program cover more businesses.
“We want to be able to take a step forward and do a little more,” said Rep. Jason Saine, R-Lincoln, the working group co-chair. “Part of what this means is putting in some significant dollars to keep things moving but at the same time acknowledging that federal money is coming in.”
On March 27, President Donald Trump signed a $ 2 trillion coronavirus relief package that will provide $ 350 billion in forgivable loans to small businesses nationwide.
The Golden LEAF program provides bridging loans of up to $ 50,000 with no payments for six months and an interest rate of 4 percent to companies with 50 employees or less. After six months, the interest rate will be below 5.5 percent. Applicants must provide documented evidence of financial loss from COVID-19.
To date, Golden LEAF has received 3,397 applications for a total of $ 121.5 million. The average application was $ 35,767, according to Kasey Ginsberg, director of government affairs and programs at Golden Leaf.
Rep. Chris Humphrey, R-Lenoir, said he was concerned that $ 25 million will not be enough to help all businesses in need.
“It looks like it will split $ 25 million to distribute, $ 50,000 apiece that would go to 500 small businesses,” he said. “And I know there are 913,000 small businesses in North Carolina. I just wonder how many companies out of those 913,000 or 50 or less are. “
Ginsberg said a third of North Carolina’s small businesses have no more than 50 employees and the goal of the program is to turn the funds around.
“So if someone secures funding for the federal program, they can repay that loan. We put the money back in the pool, ”she said.
The $ 25 million would be provided from the state’s general fund for fiscal 2019-2020. Golden LEAF must raise $ 15 for every $ 25 the state grants. Therefore, according to legal analysts, the organization would have to raise $ 15 million, which Golden Leaf has already acquired.
Dan Ettefagh, Senior Legislative Counsel to the General Assembly, said the bill could face opposition as it was a way for the government to give gifts to private entities and put the state in competition in the private sector in violation of the state’s constitution would represent.
However, Ettefagh argued that a 1999 legal analysis by the Attorney General found that low-interest loans are acceptable for disaster relief because they address an emergency and serve a public purpose.