Posted: Feb 14, 2012 2:04 PM EST
Updated: Mar 15, 2012 2:49 PM EDT
By Pam Kasey – email
Business Potomac Eagle owners say they may sell railroadState Rail Authority made $2.1 million from hauling freight in 2011South Charleston considers tax incentives to lure businesses back to the cityWeirton restaurant owner: No more ribs for Philly FlyersMoorefield wastewater treatment project will help Chesapeake BayMore>>Columns A name means everything; that doesn’t mean anything can be a nameWV needs to encourage students to go into educationA teaspoon Is the same as a ton to the EPAWV needs least-cost planning to keep electric rates in checkTeaching teens the true value of money in the digital ageMore>>If small businesses are the real job creators, the $13.1 million West Virginia Capital Access Program launched in January could leverage good new opportunities for workers across the state.
“This is a material and significant program to benefit the state,” said Andy Zulauf, executive director of the West Virginia Jobs Investment Trust, which administers the funds.
The WVCAP is a funding mechanism that helps small business access debt and equity capital, Zulauf explained.
It was created through the State Small Business Credit Initiative, or SSBCI, a component of the Small Business Jobs Act of 2010.
The SSBCI provided $1.5 billion to strengthen state programs that support financing for small businesses by leveraging private capital for businesses that are creditworthy but not getting the financing they need.
The West Virginia program aims to manage 60 percent of its $13.1 million to support seed stage and early stage businesses.
“If you look across the spectrum of capital from the entrepreneur’s pocket to debt financing, that was one of the biggest gaps we had in the state,” Zulauf said. Financing from that part of the program will function as purchases of stock in companies.
The other 40 percent will work on the debt side, explained Marten Jenkins, president of the Natural Capital Investment Fund. Jenkins participated in designing the WVCAP and serves on WVCAP committee that reviews and approves investment applications.
That portion will be used to enhance deals that are “almost bankable” in today’s conservative lending environment, Jenkins said — coming in with $50,000 or $100,000 on a half million — or million-dollar projects to shave down borrowing needs for companies that fall a little short on collateral or credit history.
Funds can be used for a broad range of purposes, such as the purchase of equipment and facility expansion.
The conditions of the SSBCI are challenging.
For example, all of the money has to be invested within two years. That’s more than $500,000 a month.
And SSBCI funds are expected to generate $10 in new private lending for every $1 in federal funding. At the end of five years, the $13 million should have generated $130 million in new lending and investment activity.
Several partners have come together to support the meeting of those conditions.
To get the word out quickly to lenders and others, the West Virginia Department of Commerce provided $150,000 to market the program.
“That will make sure we are hitting every bank and traditional intermediary in the state,” Jenkins said.
In addition, a $250,000 grant from the Claude Worthington Benedum Foundation will make operating and technical assistance available.
“If a loan applicant to the program or a portfolio company that’s been funded needs professional services that can’t be addressed through the Small Business Development Center or some of the other traditional service providers — there’s a unique need around intellectual property, for example, or high-level strategic planning — we can use these funds, up to $20,000 per client, to bring in a professional,” Jenkins said. “That really maximizes that investment to make sure we’re going to get the biggest bang for the buck.”
Finally, seven program participants located across the state have access to WVCAP funds, according to WVJIT Investment Analyst Michele O’Connor. In addition to the WVJIT as program administrator, they include the INNOVA Commercialization Group, the Natural Capital Investment Fund, the New River Gorge Regional Development Authority, the Mid-Ohio Valley Development Corp., the Ohio Valley Industrial and Business Development Partnership and the West Virginia Rural Health Infrastructure Loan Fund.
“They know their markets, their areas,” O’Connor said. “Having all these program participants is going to help us source deals and get the money invested in that two-year time frame.”
Establishing momentum right from the start, the WVCAP committee approved three investments at its January launch meeting, O’Connor said, totaling more than $500,000.
Two, originated by WVJIT, were with Protea Biosciences in Morgantown and Liberty Hydro in South Charleston. The third, originated by INNOVA, was with Aither Chemicals, also in South Charleston.
The WVJIT is enthusiastic about the broad support that is turning the SSBCI challenge to an opportunity for the state’s business.
“What I think is remarkable about this program is the partnerships — how everyone came together,” Zulauf said. “We all believe this is too good an opportunity to pass up.”