The next step in creation of a small business investment corporation comes May 17.
At an 8 a.m. meeting of the Economic Development Board in the State Office Building, several people will push for an SBIC to provide long-term funding to help small businesses grow.Several people will attempt to convince the board members they should commit $160,000 to get the SBIC going. Between now and then, a report on formation of an SBIC will be given to the board members so they can study the proposal.
A pitch for the $160,000 came Wednesday during a meeting in the office of David W. Adams, Utah Department of Community and Economic Development executive director.
Making the presentation were Fred S. Ball, president of the Salt Lake Area Chamber of Commerce, and R. Kent Moon, Utah director of the Small Business Administration. It was the chamber's board of governors than endorsed formation of an SBIC a week ago and it will be the SBA that licenses any SBIC that is formed.
Creation of an SBIC was suggested late last year to the chamber so Ball appointed a task force to examine the possibility of the chamber forming an SBIC. The task force released its report several days ago, but it became apparent that because the chamber is a non-profit group it couldn't have an SBIC as part of its organization because of the potential for SBICs to return profits to investors.
The task force's report said there is a need to provide some financing to fast growing small business that cannot obtain money from traditional funding sources. The report said banks loan money for short terms and shy away from the long-term loan because of the higher risk.
Besides Adams, Ball and Moon made their pitch to David J. Grant, Utah Division of Economic Development director and Lt. Gov. W. Val Oveson. Oveson supports the concept as does Grant, but Grant said the board is the entity that controls the purse strings.
Playing the devil's advocate and asking some question that his board members might ask, Grant wondered why the state couldn't advertise for bids on the creation of an SBIC. Moon said it is important for the SBIC investors to represent a broad base of the economic community so nobody dominates the organization.
Moon admitted that two previous SBICs in Utah went bankrupt, but he said it was because of undercapitalization. He said the goal is to get about $4 million in investments in the first year and increase that gradually until the SBIC has about $15 million in three years.
He stressed that an SBIC should be a public and private partnership with the idea of benefiting the entire state by creating jobs and stimulating business. If an SBIC is created by only one person, such as the state might get if the proposal is put out for bids, that person might be interested only in the profit and not care about the entire state's economic climate, Moon said.
Moon said the $160,000 will be used to hire a manager, establish an office, pay for legal work in filing the articles or incorporation and buying supplies. It will be the manager's job to raise $1 million so the SBIC can be authorized by the SBA.
During the May 17 board meeting, Moon will present a detailed work plan on where the $160,000 would be spent.