States that offer programs aimed at supporting small businesses have a significant impact on local economies, according to a recent report by The Support Center, a Raleigh-based nonprofit small business lender.
In the report dubbed “State Support for Small Business Lending: A Roadmap for North Carolina,” The Support Center reviews two cases in which South Carolina and Virginia created programs to address the growing demand for small-business loans.
Both entities, The Business Development Corporation of South Carolina and Virginia Community Capital, were established with state support, either through direct funding or legislative action.
The programs have leveraged state partnerships to raise millions of dollars to invest in hundreds of small businesses and created thousands of jobs. Both entities partnered with banks, foundations, corporations, individuals and government agencies to provide capital and resources to companies that are unable to access capital through traditional lending institutions.
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The report also provides recommendations on how North Carolina could form similar partnerships with community development financial institutions, such as The Support Center, and lenders to help small businesses.
Those recommendations include:
• Establish a state fund for small-business lending.
Through a direct appropriation, the state could provide the seed funding for a state-level small-business revolving loan fund. Additional funds could be leveraged by private foundations, banks, corporations and other investors.
• Pilot a state small-business guaranteed lending program, which would help mitigate the risk taken on by lenders when making loans to businesses that are in underserved communities.
• Establish a business development corporation.
The South Carolina Business Development Corporation is an example of how legislative action can harness existing resources to meet small-business needs. By creating a structure that allows banks to make investments in small-business lending, the state would help expand access to capital in markets that need it most.
• Create a state healthy foods financing fund to create new markets for local, healthy foods.
North Carolina currently has 349 food deserts, areas in which residents lack access to fresh healthy food. These communities suffer from a range of health problems, such as obesity, diabetes and heart disease. Meanwhile, businesses, such as healthy food producers, distributors and retailers, face barriers in accessing capital and accessing local markets. A state-level fund targeted to expanding access to capital for healthy foods-related businesses would help strengthen the local food system, bolster local businesses, and improve health outcomes across the state.
To download a copy of the report, please visit The Support Center’s website here.