We can all agree that access to working capital is a serious concern for much of the business community. why then would it be cruel to take up a bill on June 3rd in the Ohio House of Representatives proposing to set up a small business working capital loan program in Ohio?
I was very critical of this bill for a number of reasons -- timing being a big one. You can read a Daily Record report by Marc Kovac here.
A week before our legislature was scheduled to go into recess for the general election season a bill was introduced proposing a new loan program. It turned out that an extra week of voting sessions was added, and on the last day of session the bill is rushed to the House floor for a vote. In a situation like this the House was unable to give the legislation a proper hearing and there is virtually no opportunity for the Ohio Senate to act on it.
So what is left? A talking point for campaign season on a top issue of concern -- our troubled economy.
My assessment of this bill can do nothing more than offer a false sense of hope to our small business community -- both because of the late timing and weakness of the program proposed.
Let's look the what the bill proposes. It's concept is to lower risk on loans to small businesses for working capital by foreging interest earnings on state funds on deposit. State funds would not be placed at risk. Only the interest earnings would be available to change the risk equation.
We learned in the brief committee hearings on HB 521 that the state treasurer is earning about one percent per year on money invested for two full years. That means that if the state were able to place the full $100 million it would take one year for the program to generate a million dollars that could be used toward any defaults on the loaned $100 million.
It is highly questionable if this is a workable financial equation. It could be that in a differemt future financial market that higher interest earnings could make a program like this viable.
As it is, the legislature is not likely to return to session until November. If it were to be passed then, there would need be a further delay to set up the program, followed by a lengthy delay for interest earings to build a reserve to be used to lower the loan risks.
Unfortunately wee see too many bills in an election year that do a lot less than the headlines might indicate. In this case rthe small busness community sees something glittering that I described in debate as nothing more than "fools gold."