Vrakas announces Waukesha County small-business loan initiative
County Board to vote on proposal Tuesday
Waukesha - Existing Waukesha County small businesses with growth potential could get tax-financed, interest-free loans of up to $50,000 under an economic development initiative County Executive Dan Vrakas announced Wednesday.
Called the Small Business Leverage Loan Program, the effort would start with $300,000 next year, enough to serve a half-dozen businesses or more. The program is set for County Board action Tuesday.
Vrakas said he's been looking for an economic development tool that the county could use. Director of Administration Norman Cummings suggested the loan program after learning of a similar effort in Minnesota.
"A lot of companies can get around third base, but they need that extra push to get to home plate," Vrakas said in announcing the initiative at a news conference Wednesday.
Earlier Wednesday, in an appearance before the County Board's Finance Committee, which recommended approval of the program, Cummings said: "We are typically not in this business. But in these times and these kinds of difficulties," he said, the county needs to join the effort to help promote job growth, especially among small businesses.
While the source of funds is tax money, Vrakas said, "The way to keep everyone's taxes low is to make sure we have economic development, and these dollars have been earmarked for economic development."
The loans would be targeted to Waukesha County companies in existence for at least a year that are designated as "high-impact" job creators, such as those in manufacturing, technology, distribution or suppliers to larger Waukesha County businesses. Companies seeking to add products, services or capacity would get priority.
Dave Kircher, who helps package small-business loans through the Wisconsin Business Development Finance Corp., helped draft the loan program criteria.
"These will be more highly leveraged companies because they've raised money using all they've got already," he said. Most likely they've already borrowed cash from relatives and friends.
"Angels and investors don't play in that market," he said.
Bart Adams, chairman of the Waukesha County Business Alliance's Economic Development Committee, said in the past those small-business owners used second and third mortgages to raise capital needed to fill financing gaps - a revenue source that's dried up with falling property values and stricter banking regulations.
"It's the right product at the right time in the right market," said Barbara Eckblad, director of lending for the Wisconsin Women's Business Initiative Corp., which also helps small businesses raise capital. Waukesha County will contract with the Women's Business Initiative to administer the county loan program at a cost of about $1,000 per loan, Cummings said.
Unlike municipalities, counties in Wisconsin can't take advantage of a widely used economic development tool - tax incremental financing, or TIF - to attract new or expanded businesses. A TIF allows a municipality to invest in projects that promote new tax base and, for as long as three decades, use all property taxes generated by that growth and otherwise shared with overlying taxing districts to keep the funds to pay off project costs.
After the TIF project costs are paid off, any residual tax funds are returned to the overlying taxing districts. In the past three years, Waukesha County has gotten about $800,000 in tax refunds from TIF districts that are closed out.
Cummings said $300,000 of that money - which would otherwise go into the general county fund for one-time county expenses - would finance the loans, and they would be repaid.
Loan recipients would pay no interest for three to five years. The money would have to be repaid in full then, unless it was converted to a short-term loan with interest.
The ordinance creating the loan program is set for action at Tuesday's 7 p.m. County Board meeting. Both the Executive and Finance committees have recommended approval.
