JEFFERSON CITY — Gov. Jay Nixon's plan to provide loans to small businesses took a step forward Tuesday despite some concerns about whether a state finance board could afford it.
The Missouri Development Finance Board voted to seek proposals from private-sector groups to administer the loans while simultaneously studying how the plan would affect the board's own finances.
Nixon's proposal would use $2 million from the finance board to establish a loan pool that could provide up to $25,000 each to businesses with five employees or fewer.
Since Nixon took office in January, more than 230 businesses have responded to an online survey expressing interest in the loan program. Demand is expected to far exceed the supply of money, said Department of Economic Development Director Linda Martinez, meaning the state could have to use a lottery system to decide which of the qualified businesses receive the money.
"To turn our economy around, Missouri small-business owners must be able to access capital to expand their operations and create the jobs of the future," Nixon said in a written statement. The board's action Tuesday is "an important step toward creating a pool of funds to provide low- and no-interest loans that will help small businesses grow and jump-start our economy."
Martinez was presiding over her first meeting Tuesday as chairwoman of the finance board.
Republican Lt. Gov. Peter Kinder had led the board under former Republican Gov. Matt Blunt. But Nixon, a Democrat, named Martinez to replace Kinder as chairman earlier this month. Kinder remains a member of the board.
The state finance board gets part of its revenues by charging a 4 percent fee to its tax credit recipients. But Kinder said Tuesday those fee revenues might not be a sure thing.
For example, Kinder said, troubles have arisen with a previously approved plan to provide $25 million in tax credits to the Kansas City Chiefs for the renovation of Arrowhead Stadium and construction of an indoor Chiefs training facility at Missouri Western State University in St. Joseph.
"I raise the question about the availability of funds to get into the loan business" for small employers, Kinder said.
Finance board member L.B. Eckelkamp, a banker from Washington, Mo., estimated that more than half of the loan recipients might default because of the risky nature of small startup businesses.
The state board plans to decide later this spring whether to start the loan program, after waiting for the results of its own financial review and its request for proposals from loan managers.