State Treasurer Proposes Small Business Loan Program
By Andrew Doughman / Nevada News Bureau
CARSON CITY – A proposal from the state’s treasurer could use $20 million to create a small business loan program.
Treasurer Kate Marshall today testified before a Senate committee about the bill, which she said would help create jobs and revenue for the state.
Her proposal, Senate Bill 64, would allow the state to invest in a low-interest certificate of deposit with a bank when that bank then extends a low-interest loan to a small business.
Small businesses would, however, still have to qualify for a loan under the bank’s rules. The bank would also be accountable for guaranteeing the loan. This, Marshall said, would ensure the state’s money was not at risk.
The bill, however, may not have an immediate effect.
Sen. Ruben Kihuen, D-Las Vegas, listens to Treasurer Kate Marshall explain her low-interest loan proposal. He said he supports it as a job-creating bill. Photo: Cathleen Allison/NevadaPhotoSource.com
Bill Uffelman, lobbyist for the Nevada Banker’s Association, said that he supports the bill. But he also said the bill’s effect would be negligible since interest rates are already so low.
“It’s not that they don’t have money to lend; it’s that they don’t have people who meet their criteria,” said Sen. Ben Kieckhefer, R-Reno.
Sen. Don Gustavson, R-Sparks, asked whether any banks have a high-interest certificate of deposit available right now.
Marshall replied that the highest rate she had been able to find was a 2.47 percent, 60 month loan. Under her proposal, the state could invest at a rate 2 percent lower than the market rate.
This would create a loan opportunity for small businesses at a rate of 0.47 percent.
She said the bill would create the program so that when interest rates increase, small business owners can still find a low-interest loan.
Artificially deflating the interest rate would mean the state would lose money on its investment. Marshall, however, said that more money would come back to the state from the economic activity the loans generate.
She cited programs in several other states that had created similar programs that had been successful.
Others were not so sure.
“It seems to me to give up a sure thing in exchange for the possibility of a trickle-down effect that that fundamentally does not fit with the mission of the state treasurer’s office, and that is to invest the state’s money conservatively,” said Sen. Greg Brower, R-Reno.
If this bill sounds familiar, that’s because former Gov. Jim Gibbons vetoed it during the 2009 legislative session. The bill, Assembly Bill 451, also included language that would, in some instances, establish loan preferences for minority, veteran or women business owners.
That language is also in Marshall’s bill, but she said legislators could remove those provisions with an amendment.
Several business groups testified in favor of the bill, saying it would create another incentive for businesses to spend.
Some questioned the constitutionality of the bill. Article 8, Section 9 of Nevada’s constitution prohibits the state from loaning money to businesses. Marshall, however, said that the loans would be administered by the banks.
She also said the Legislative Counsel Bureau had not raised constitutionality issues with her office.
Sen. Ruben Kihuen, D-Las Vegas, did not call for a vote on the bill because his vice chair, Sen. John Lee, D-North Las Vegas, was not in attendance.
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