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Governor calls for small business bailout

Barbour, MDA’s Swoope tell business leaders that previous program was met with a good amount of success

Part of the effort in the financial recovery from Hurricane Katrina included a state program that guaranteed portions of loans for small businesses trying to get back on their feet after the storm.

Barbour

Barbour

Gov. Haley Barbour and Mississippi Development Authority executive director Gray Swoope told a group of business leaders at the Capitol recently that the program was met with a good amount of success.

According to Swoope, between 93 and 94 percent of the loans the state guaranteed as part of the program were repaid in full.

With that precedent set, Barbour told the same group of business leaders that there is a possibility the state might venture off into a similar program to help small businesses that are having trouble borrowing money as the credit markets have tightened.

“This is something we’re thinking about,” Barbour said in an interview shortly after his meeting with business leaders in his office wrapped. “Would it be helpful? Can we do it in a way that is responsible and not an unnecessary or unacceptable risk with the taxpayers’ money? We’re not looking to have a beef plant. What we are looking for is a way to help small businesses get going a little bit faster in a time when credit is harder for them to get than it was two years ago.”

Swoope

Swoope

Barbour said the idea is still in the planning and development stage, and that it’s “not even close” to being ready to present to lawmakers, who would have to approve legislation establishing the program. Barbour did say he expected an up or down vote on the issue by the end of the session.

There are similar programs already underway. The U.S. Small Business Administration has loan programs, and there are other credit programs available to assist small businesses in obtaining credit.

“We want to make sure we fully understand the effects of not only on the taxpayers but also small businesses, Barbour said. “We don’t want to use taxpayers’ money to pay for something that’s being already done. There’s some stuff out there we don’t want to compete with. Is there a gap (in the credit markets for small businesses)? Is there a hole that should be responsibly filled?

“There are small businesses in Mississippi today that could have taken the same balance sheet and gone to the bank two years ago and got a loan. They go to the same bank and can’t get a loan. We ought to be looking for something that can fill that gap.”

Barbour said several times while he was pitching the idea to the assembled business leaders that this program would not be what he called “a government giveaway.”

Ron Aldridge, who directs the Mississippi chapter of the National Federation of Independent Businesses, agreed with Barbour’s assertion that small businesses are finding it difficult to borrow money. He said some of his members have had to shut down because of their inability to obtain credit.

A program like the one Barbour mentioned “is something that would help,” Aldridge said.

Most of the attention during the credit crunch has focused on banks’ reluctance to lend money. Barbour said a lot of large financial institutions that received money under the Troubled Asset Relief Program  are not lending the money, which was the intent of the program, but are instead using it to buy and sell assets for profit.

“There’s nothing wrong with that, but it doesn’t do anything to help the credit markets,” Barbour said.

Jerry Host, president of Trustmark Bank in Jackson, cited a study by the Atlanta Federal Reserve that found that, on the list of concerns of small businesses, the ability to borrow money was eighth. At the top of the list, according to Hose, was generating revenue.

“Businesses that had capital expenditure programs on the drawing board when this recession hit, they cancelled those programs,” Host said. “So loans we anticipated we were going to make, we no longer made. There’s no one solution. It’s a combination of the economy getting better, consumers starting to spend, the government stimulus we’re seeing and continued low interest rates. All of those things have to happen. The last piece is employment rates rising. It’s a very complex issue and I think it’s going to take a variety of solutions to resolve.”

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