New bill to aid small businesses

by Amanda Iacone
Staff Writer

An Ohio Link loan helped Mike Woodford pay for a new building to house his structural steel fabrications business in Lowell.

And local business owners will have greater loan flexibility as well, if a bill in the Ohio House of Representatives is passed.

The bill aims to stimulate economic development in economically distressed regions such as Athens County by changing tax abatement laws and encouraging banks to loan to risky new businesses.

Although the bill is geared toward all types of businesses — large corporations, manufacturing and small, privately-owned companies — most businesses in the Athens area are classified as small businesses.

"The goal is to take these distressed areas and level the playing field for them," said Jennifer Detwiler, director of communications for the House.

Sponsored by Rep. Nancy Hollister, R-Marietta, the first component of the bill will improve the capital access loan program by minimizing the financial risk of lending to start-up businesses. The state will fund a reserve account to cover banks' losses from default loans.

The second part of the bill will expand the Tax Increment Financing program, which keeps property taxes on developed land equal even after the land is improved. The plan will allow local governments to buy bonds to pay for public improvements benefiting the property and community. Improvements could include sewage lines, electric lines and roads.

And the plan allows local governments to complete large projects in a shorter period of time, Detwiler said.

The tax financing program offers small local governments the flexibility to make necessary improvements they otherwise could not afford, she said.

Local banks will work with customers to apply for government loans, said Jerry Post, the vice president of commercial lending for People's Bank. Banks already work with non-profit organizations such as the Small Business Development Center and the Small Business Administration, which is a government entity.

Government loans offer cheaper interest rates, but are tied to certain criteria, Post said. Some loans, like Woodford's Ohio Link loan, concentrate on creating jobs.

Woodford said he added three employees to his staff because of his Ohio Link loan.

"Ohio gives you a break on the interest rate if you include more jobs," he said.

Woodford borrowed $100,000 with 11.5 percent interest. But the government break brought his rate to about 9.5 percent.

Woodford borrowed a small loan from a local bank to start his business, Top Quality Fabrications, three years ago. The process was easy because of his credit history, he said.

But businesses must meet certain terms before approval can be given, said Mike Mullins, vice president of business banking at Bank One. The amount of the loan, market, length of the payback period and whether the business will generate enough profit to repay the loan are criteria considered before approval.

The odds are against start-up businesses being successful. Higher interest rates cover that risk. A new restaurant or bar carries a higher risk than franchised operations, Post said. Franchises can offer information on past success in a similar market.

But Hollister's new bill will offer lending institutions the opportunity to take higher risk ventures than they normally would, said Zach Haughawout, a legislative aide and spokesman for Hollister.

Hollister said the bill will be introduced to the House in about two weeks.