Legislation Seeks Growth Capital Program to Support Rhode Island Businesses
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Legislation seeks $20-million Growth Capital Guarantee Program to create new, high wage job opportunities for Rhode Islanders
Legislation to create a $20-million Growth Capital Guarantee Program has been introduced to the Senate and House of Representatives of the Rhode Island General Assembly. The legislation seeks to reposition existing guarantee authority currently in the Rhode Island Industrial-Recreational Building Authority (IRBA) program to help companies well positioned to create new high-wage jobs obtain growth capital from private sector lenders using assets other than real estate, machinery and equipment.
Plans for the new program were put forth by the Rhode Island Economic Development Corporation (RIEDC) as a key component of the agency’s 2008 Economic Growth Plan, which seeks to increase the percentage of jobs in Rhode Island that pay above the national average wage of $42,000 from 40 to 60 percent over the next ten years, with increases each year. The plan identified gaps in the state’s financing programs and suggested steps the state can take to increase the availability of growth capital in the Rhode Island marketplace.
The Senate legislation (S2864) is co-sponsored by Senator Majority Leader Theresa Piva-Weed, Senate Corporations Committee Chairman William Walaska, Walter Felag and David Bates. The House Legislation (H8200) is sponsored by House Majority Leader Gordon Fox.
The program is similar to programs in neighboring states, including Massachusetts and Connecticut, and will make Rhode Island more competitive in attracting and retaining jobs in the region.
“Many years ago companies would use assets like machinery and equipment to secure capital. Today’s new economy businesses are much better served with working capital programs that recognize the value of assets like patents, proprietary processes, brands and licenses. The Growth Capital Guarantee Program proposed by RIEDC will enable growth in high-wage sectors where Rhode Island has a strong position to create more good jobs,” saidPeter Collins, Founder and President, a2b Tracking Solutions, Inc.
Located in Portsmouth, a2b Tracking Solutions is a U.S. leader in scanning technology for companies such as Target and the United Parcel Service (UPS). The company found early success in 1994 when it developed label-generating software for retail giants K-Mart and Wal-Mart. In the year’s following, a2b has become a leader in moving the industry into mobile computing. To date, the company has completed more than 2,000 tracking installations around the world and is now working with the Department of Defense to bring bar coding technology to Army supply depots to manage orders and inventories.
IRBA currently has $80 million in guarantee authority consistent with legislation passed in 1958 when the program was created. $64 million of this authority is not currently committed. The IRBA board has passed a resolution reducing IRBA’s guarantee authority from $80 million to $50 million. The legislation currently under consideration will create a new Kushner authority to create a $20 million Growth Capital Guarantee Program. The state’s overall contingent liability will decrease by $10 million.
“Companies ready to grow in Rhode Island often face difficulties accessing the capital they need to expand and create new jobs,” said RIEDC Executive Director Saul Kaplan. “Most of the state’s existing loan products are traditional asset-based loans and are not available to growth companies with non-conventional balance sheets. This Growth Capital Guarantee Program will enable growth in high-wage sectors where Rhode Island has a strong position to create more good jobs.”
The legislation proposes that the Growth Capital Guarantee program be managed by the RIEDC and its board with policies and procedures consistent with IRBA and the successful Small Business Loan Fund program.
“We are proud to support this important component of RIEDC’s economic growth plan,” said Senator William Walaska, Chairman, Senate Corporations Committee. “It is critical that Rhode Island move quickly to update its financial tools to reflect today’s business needs. Our economic prosperity depends on our ability to respond to changes in the market place and to make sure that our economic development toolkit remains aligned with our strategy for high-wage job creation.”
To qualify for the program companies will need to demonstrate that they have established revenue, a strong customer base and strong prospects for creating new jobs. Guaranties will only be provided to banks and venture lenders with relevant underwriting experience, a proven track record and loan management expertise.
“There are things we know we can do better to support high-wage industries and create better jobs for Rhode Islanders. Improving our finance programs is one of them,” said House Majority Leader Gordon Fox. “The Rhode Island market place struggles to provide growth capital to knowledge economy companies poised for growth. This new program will help close the financing gap. Repositioning the IRBA program creates an opportunity to better support business and reduces the state’s total liability—it’s a win-win situation for the state and for business.”
Proponents of the legislation hope the Senate and House bills will pass quickly, citing an immediate need to get more capital into the marketplace, reposition Rhode Island’s economy and stimulate job growth.
“Access to capital is essential to adding the jobs and bringing in the talent a company needs to grow and expand into new markets. When a new opportunity emerges, companies like ours must be a position to respond quickly. The Growth Capital Guarantee program proposed by RIEDC will put a program into the marketplace that specifically addresses the needs of innovation economy companies in Rhode Island and helps us create more high wage jobs here in the state,” said BioProcess Technologies CEO Tim Burns.
Bioprocess Technologies has been growing fast since its launch in 2003, when Burns and co-founder John Haley recognized that farms and businesses needed a water pre-treatment system that was practical and affordable, always reliable and convenient to install and use. Burns and Haley used their combined expertise in wastewater management to develop a new pre-treatment method that uses microbes to clean water prior to its release into municipal water treatment systems.
Bioprocess Technologies and a2B Tracking are just two examples of Rhode Island growth companies that would directly benefit from the new program. In addition to making Rhode Island more competitive with Massachusetts and Connecticut, the Growth Capital Guarantee program provides the state with a flexible tool it can use to attract jobs in Rhode Island’s high wage sectors, such as the marine trades, defense, health and life sciences, defense and information technology and digital media sectors. These sectors represent industries where Rhode Island already has a strong foundation on which to build.
Hearings on the two bills have not yet been scheduled.