State officials unveiled a new series of programs Monday, aiming to help small businesses expand, as they have faced trouble securing loans during the economic downturn.
The new programs are linked to the state's success in securing $15.5 million in federal funding.
That funding comes from the U.S. Treasury and its State Small Business Credit Initiative, which has rolled it out in numerous states. It is anticipated to be the catalyst for at least $10 in private lending funds for every $1 of federal money, officials said, suggesting that upwards of $155 million in new loans will be made.
The funding will be crucial in helping small businesses overcome the difficulty in persuading banks to lend them money, said Becky Naugle, state director of the Kentucky Small Business Development Center at the University of Kentucky.
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"It's better than it was two years ago, but it's still really, really bad," she said. "A lot of the lenders are looking for what we would consider the perfect loan package, which means it has more than enough collateral, stellar credit scores and they really don't need the money almost, so that it's that good of a loan package.
"Deals that would have been just a lay-down four years ago are being turned down right and left today."
Naugle said the three programs being implemented at the state level address a variety of concerns by lenders. The programs are:
■ The Kentucky Capital Access Program, modeled after the Treasury program, in which states match the combined contribution into a reserve fund made by the lender and borrower. The reserve fund is used to help cover losses on the loan.
■ The Kentucky Collateral Support Program, in which the state provides collateral support, reducing the risk for the lender if a business doesn't have enough collateral.
■ The Kentucky Loan Participation Program, which the U.S. Treasury has structured so that states can either buy a portion of a loan made by a lender or make a loan alongside the bank's loan.
"In some cases where it's higher risk and more complicated, the lender has always felt better if there's someone else in the deal with them," Naugle said.
Gov. Steve Beshear hailed the program Monday, calling it "great news for the commonwealth and another critical step in the right direction toward improving the Kentucky economy. ... We want all of our families working."