Cooperation, rather than confrontation, between the Small Business Investment Corp. Task Force and the Utah Economic Development Board appears to be the watchword, over the hiring of an expert to examine the formation of an SBIC.
The task force will provide the board with several names of people involved with successful SBICs in cities comparable in size to Salt Lake City with the hope state officials will quickly select one to come to Utah and examine a request from the task force the board provide $160,000 to get an SBIC organized.At a June 21 meeting, the board voted to spent a maximum of $2,500 to pay the expenses of an SBIC expert to come to Utah and talk about SBICs. That recommendation came from the board's Special Opportunities Fund Subcommittee.
During Thursday's task force meeting, Peter Cooke, task force chairman, said the state is only one of several partners in formation of an SBIC and if the board continues to study the $160,000 request, the business community will move forward without the state's help.
R. Kent Moon, Utah director of the Small Business Administration, said SBICs provide gap financing to small businesses that are on the verge of growth, but cannot obtain money from traditional sources. He said many banks shy away from the long-term loans because of their higher risk so many small businesses are stagnated in their growth.
Moon hopes the SBIC can attract $3 million in capital initially and grow to about $10 million within three years. He said SBICs in other states have invested $10 million in Utah companies in the last five years.
Last December, the Board of Governors of the Salt Lake Area Chamber of Commerce appointed the task force to examine the feasibility of forming an SBIC, possibly having the SBIC be part of the chamber. However, because the chamber is a non-profit organization, it couldn't have a profit-oriented SBIC as part of its operation.
Is there a demand for this type of financing? Moon said that since the task force has been meeting and people are learning about "gap financing," several businesspersons have contacted the SBA office about borrowing money.
Cooke said there is plenty of technology being developed in Utah, but because many businesses cannot borrow money to expand, they sell out and in many instances the sale is to foreign businesses. Later, the foreign interests "sell back our technology at a profit."