Wisconsin is among at least 47 states that operate
state business loan programs and it may fail to qualify for a matching federal
small business initiative if such programs are eliminated, according to
research by the Wisconsin Technology Council.


Information from four national sources indicates that 47
states have small business loan programs, which are a precursor for qualifying
for one of a handful of matching programs through the federal government’s
State Small Business Credit Initiative.


Data comes from the State Science and Technology Institute,
the Center for Regional Competiveness, the Center for Community and Economic
Research and the Praxis Strategy Group, all organizations with a history of
tracking state economic development trends.


The $1.5 billion State Small Business Credit Initiative was
created by the 2010 Small Business Jobs Act. It gives states the ability to
design their own matching programs to leverage their state-backed loans and
private dollars.


“We are not aware of any state of Wisconsin’s size that
doesn’t offer (small business) loans,” said Dan Berglund, director of the
Ohio-based State Science and Technology Institute.


“All states except North Dakota, Wyoming and Alaska participated in
the federal government’s State Small Business Credit Initiative,” said Delore
Zimmerman of the Praxis Strategy Group in Grand Forks, N.D. However, he added, even
those three states indirectly take part in the federal initiative through
programs managed by coalitions of cities.


Direct loans, participation loans and loan guarantees are
among the top five economic development programs in 45 of 50 states, according
to the State Business Incentives Database at the Center for Community and
Economic Research. Thirty-five of 50 states have equity capital programs.


The information was released by the Tech Council as members
of the Wisconsin Legislature and Gov. Scott Walker debate the future of state
business loan programs operated by the Wisconsin Economic Development Corp.,
which is the state’s lead economic development agency. A recent state audit
criticized some of WEDC’s fiscal practices but noted improvements in some
WEDC’s loan delinquency rate fell from 2.7 percent to 0.2 percent
in the year ending Dec. 31, 2014, principal delinquency dropped from 8.8
percent to 1.7 percent, and the balance on uncollectable loans decreased from
$5.5 million to $1.3 million. Also, the delinquency rate for annual performance
reports by WEDC loan and grant recipients fell from 55 percent in December 2012
to 5.4 percent in December 2014.


The federal State Small Business Credit Initiative allows states
to choose from five basic types of programs (four loan programs or a state-run
venture capital program), and they customize the rules to suit local market
conditions. To date, community banks and mission-oriented lenders are the major
participants in the loan programs, in part because they often specialize in
serving small businesses that do not fit a traditional credit profile.


States may implement the program through state agencies,
quasi-public authorities or private contractors. This allows a state to operate
its federal matching program through whatever organizational structure exists
in the state with the business lending experience and capacity to execute.


In Wisconsin, the WEDC is a quasi-public agency established by
Walker and the Legislature in mid-2011.


Berglund said SSTI has “long believed that whether an (economic
development organization) is a state agency or quasi-public is immaterial to
its success. It appears to be more about the processes that are in place and
the people leading the organization and implementing those processes. It is
most important that any of these organizations be set up with transparency –
while protecting confidential business information – and accountability in


The Wisconsin Technology Council in an independent, non-profit
organization that advises state government on policy issues while serving as a
catalyst for economic development in various technology and entrepreneurial