Gov. Mark Dayton unveiled his own small-business stimulus program Wednesday, funneling $100 million to community banks to spur lending to cash-strapped Minnesota businesses.
"These funds will help break down one of the largest barriers to job growth in our state," he said.
Dayton acknowledged there is no guarantee that banks will use the money for loans, but said the situation is too troubling to do nothing.
The governor announced the plan the day after convening a statewide summit on jobs that featured hundreds of Minnesota business owners complaining that banks were being too stingy with loans. The governor has devoted a significant share of his administration to energizing the state's economy, hoping to end the state's string of multibillion-dollar budget deficits.
"When you hear over and over again that successful businesses with proven track records are not able to get financing to expand, obviously that works against Minnesota in terms of job creation," Dayton said Wednesday.
Under the plan, the State Board of Investment will disburse $100 million among any of Minnesota's roughly 300 community banks that qualify -- up to $1.5 million per institution.
The banks, in turn, are asked to lend that money to small businesses. The infusion of cash will double an existing program originally designed to spur lending. Dayton's decision to pump more money into the program needs no legislative approval.
Dayton said he will write a personal letter to banks that take the money, stressing the importance of lending it to businesses in need.
"We can't prod or force the lenders to do more, but we can lead by example and encourage more active participation," Dayton said.
Tom Borman, chairman of Dayton's small business capital access task force, said he is confident that bank officials he has spoken with will use the money for loans.
The state will have no say in deciding which businesses get the loans. Those decisions will be left solely to the local banks.
Howard Bicker, executive director of the State Board of Investment, said the state's community banks are ideal vehicles for the money because they are where most Minnesota small businesses go for loans. Large banks like Wells Fargo generally aren't interested in such small amounts, he said.
Dayton acknowledged that it's is a small step, but only the first in a series.
"There isn't a single answer and this is a complex problem," he said. "It didn't develop overnight and it won't be resolved overnight."
Bicker said money for the program will come from the $1 billion cash-on-hand at the State Board of Investment, which manages the state's multibillion-dollar pension portfolio.
The program is a rock-solid investment for taxpayers, Bicker said. The money the state deposits into local banks is federally insured and should return a tidy profit from interest.
"Entrepreneurs need to know that we are going to work aggressively to give them the tools they need to create jobs," Dayton said.
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