Massachusetts to Receive $22M in Federal Funding For Business Loans

SPRINGFIELD – Massachusetts will get more than $22 million in federal funding aimed at stimulating at least 10 times that amount in small business lending, the U.S. Department of the Treasury announced last week.

“We definitely will see some of that money here,” said Christopher L. Sikes, executive director of the Western Mass Enterprise Fund Inc.

Based in Holyoke, the Western Massachusetts Enterprise Fund provides loans of up to $350,000 to small businesses and also helps businesses get business loans.

“It’s harder and harder to make these loans because the economy is so fragile,” Sikes said.

Business balance sheets have been hurt by a loss of revenue. Also, credit card companies have reduced available credit, damaging credit ratings for both individuals and businesses.

Meanwhile, businesses are carrying more accounts receivable, that is debts owed to them, mostly by other businesses, for goods and services. They also need money to expand and update equipment, Sikes said.

The Western Massachusetts Enterprise Fund has already received a competitive $750,000 capital grant through an existing Treasury program. The new pot of money totaling $1.5 billion nationally was part of a federal small business initiative enacted into law two weeks ago.

Matthew C. Anderson, a spokesman for the U.S. Department of Treasury, said another component of the small business bill that would provide $30 billion in capital to lenders for small business loans has not yet been put into force.

The $1.5 billion will be distributed to states by the end of this year, he said. States will distribute the money on a competitive basis to agencies, such as the Western Massachusetts Economic Development Fund, with a requirement that they use each $1 in capital to raise $10 from elsewhere.

That means the $22 million promised to Massachusetts could mean $220 million in loans. Where the money will go within the state has yet to be determined, Sikes said.

“Our money helps attract other money,” Sikes said. “Banks send us a lot of business.”

Sikes said the Enterprise Fund’s involvement often gives other lenders confidence in a business’s future. Also the Enterprise Fund has more flexibility in what its loaned funds can be used to do.

Local banks report having the money to lend already, said Jeffrey S. Ciuffreda, vice president of government affairs for the Affiliated Chambers of Commerce of Greater Springfield. Companies basically fall into two categories: those that want loans but can’t get them because of poor credit (see poor credit business loans), and businesses with solid balance sheets that are reluctant to borrow money because they don’t see the economy improving fast enough.

“I don’t know what this program would do for that latter group that is holding off on any expansion,” Ciuffreda said.