Nevada small businesses could get help securing loans

The value of loan collateral has disappeared like a desert mirage in recent years, but Nevada officials are expecting a $13.8 million federal grant to help small businesses borrow money.

Gov. Brian Sandoval and bankers will meet Monday in Carson City with Cliff Kellogg, director of the State Small Business Credit Initiative, about implementing the program in Nevada. The grant would help small businesses supplement their collateral to get a new loan.

"The governor likes it. He's quick," said program coordinator Mendy Elliott.

Elliott said she has reviewed a program in Michigan that limited loans to less than $20 million and to businesses with fewer than 500 employees.

Here's how it would work:

A small business with good credit applies for a loan at a bank but discovers that it lacks sufficient collateral, such as real estate or equipment, to secure a loan of, say $1 million. In many cases, the value of commercial real estate has plummeted in Southern Nevada.

So the bank could refer the loan to the state and seek enough cash to bring collateral to an acceptable level.

Cash from the program would go into a special account and would be refunded to the state when the loan is repaid to a revolving loan fund.

"We want the program to be self-sustaining," Elliott said. The funds could be used for a different purpose if needs change.

Elliott estimated that 30 to 40 small-business borrowers could participate in the program at any one time. The program is expected to begin operations by early August.

Bank of George Chief Executive Diane Fearon said the program concept is good, but she said lack of collateral isn't preventing many businesses from borrowing money from her bank.

"I have not encountered a volume of loan requests that would be helped by this program," she said.

Small businesses generally are reducing their debt and have no appetite for additional debt until revenues start to increase, Fearon said.

The National Federation of Businesses with the past two months did a national survey of small businesses and found 93 percent of them had satisfied their need for loans, she said.

The credit initiative was part of the Small Business Jobs Act, which President Barack Obama signed into law in September. The act set aside $1.5 billion in federal money for the initiative, but the government estimates that the money will spur up to $15 billion in small business lending.

Contact reporter John G. Edwards at
jedwards@reviewjournal.com or 702-383-0420.