Cabinet for Economic Development
Governor Ernie Fletcher and Economic Development Secretary Gene Strong Announce Small Business to Get Big Lift From State Loan Program
FRANKFORT, KY – A new loan program from the Kentucky Cabinet for Economic Development will provide a big boost to small businesses in the state.
Governor Ernie Fletcher, along with Cabinet Secretary Gene Strong, announced today that the Kentucky Economic Development Finance Authority (KEDFA) is launching a program to assist businesses having 50 or fewer employees. The program allows loans of between $15,000 and $100,000. At least one full-time job must be created within the first year of the loan disbursement and maintained through the life of the loan.
Nearly 95 percent of Kentucky’s firms employ fewer than 50 people, and these companies generate the vast majority of new jobs in the state.
“We believe this new loan program will make it easier for these companies to thrive,” Governor Ernie Fletcher said in announcing the new program. “As vital as these small businesses are to the Commonwealth, most of them have a slim margin of error during those first few years of operation, and sometimes a loan is critical to their success. The problem is, conventional lenders may turn them down as too high a risk. This new program fills that void.”
Loan proceeds may be used for acquisition, construction, expansion, working capital or any other business expense deemed reasonable by KEDFA.
“Lending money for working capital needs is a need that goes unmet for many small Kentucky businesses,” Strong said. “That’s just one of the advantages of this new program. KEDFA also may be able to provide borrowers with a longer repayment period than conventional lenders would allow for the same loan purpose. In addition, KEDFA might be willing to accept a second lien on equipment or second mortgage behind a bank loan as collateral, whereas another lender may not.
“We expect to lend to startup companies and other young companies that have not established a sound financial track record, which is considered riskier lending. But it’s a risk we think is worth taking, because small businesses are the future of Kentucky’s economy.”
The new loan program was authorized by Senate Bill 156, which was sponsored by Senator Gary Tapp (R-Waddy) – himself a small-business owner – and passed by the General Assembly earlier this year. Other key supporters included Senator Alice Forgy Kerr (R-Lexington), who helped push the bill through the Economic Development, Tourism and Labor Committee, and Rep. Ruth Ann Palumbo (D-Lexington).
"This is another tool to help small businesses in Kentucky grow Kentucky's economy and help their local communities,” stated Senator Tapp. “Since small-business owners are the backbone of our economy, I want to thank Governor Fletcher and Secretary Strong for supporting the direct loan program."
The U.S. Small Business Administration also has a variety of lending programs, the most commonly used being a bank loan guaranty and fixed-asset lending (capped at 40% of project costs). These loans can be used in tandem with KEDFA loans to help businesses assemble a complete financing package.
The interest rate on the new KEDFA loans will be tied to the Wall Street Journal prime rate at the time of closing, plus a spread based on a complete risk profile of the project. Loans will have repayment time frames of three to 10 years.
KEDFA was established within the Cabinet for Economic Development to encourage economic development, business expansion, and job creation by providing financial support through an array of financial assistance and tax credit programs.
To find out whether the small business loan program is appropriate for your business, contact the Cabinet for Economic Development’s Department of Financial Incentives at 502-564-4554 or visit www.thinkkentucky.com.