State Loan Program
Posted: June 5, 2015
While our esteemed governor continues to traverse the country while deciding if he wants to run for president, the controversy continues to swirl around his job-creation agency, Wisconsin Economic Development Corp. One of the options is to not allow WEDC to make any more loans to businesses in the state because some of the past loans have been called into question.
The dumbest thing the state legislature can do is to not allow WEDC to make any more loans to businesses that need them. Certainly, there has to better accountability. But to have Wisconsin become just one of three states that does not operate a state loan program would be a big mistake.
The WEDC was cited as agency that was out of control three years ago. But it looks like the organization is starting to get its act together.
WEDC's loan delinquency rate fell from 2.7 percent to 0.2 percent in the year ending Dec. 31, 2014. The balance on uncollectable loans decreased from $5.5 million to $1.3 million during the same period of time. In addition, the delinquency rate for annual performance reports by WEDC loan and grant recipients fell from 55 percent in December, 2012, to 5.4 percent in December, 2014.
Now would not be the time to pull the rug out from under the agency which was designed to assist small business. However, instead of making loans directly to businesses, maybe John Torinus, a longtime business owner and member of the Wisconsin Manufacturers & Commerce, has a better idea. He suggests the state should offer banks partial loan guarantees as incentives to lend to start-up and emerging companies. This way the banks, who are experts at lending, can take the hands out of the political body of the WEDC.
Brian Doudna, who is the former executive director of the Eau Claire Area Economic Development Corp., is the new executive director at the WEDC. He suggests the state and local economic development programs provide "gap financing" once a business has secured private capital since tax credits are fine for businesses that are established, but not very relevant for start-up companies.
Either way, the state legislature is going to decide the fate of whether the WEDC can continue making loans to businesses in Wisconsin. My hope is that cooler heads prevail and we don't go backwards.