Editorial: Don’t be stingy with help for small businesses

At a time when thousands of small businesses in Virginia are fighting to stay afloat, the state agency charged with throwing them a lifeline stands accused of keeping too tight a hold on the purse strings — only loaning out 10% of funding allocated in 2019 to help businesses in need and sitting on the rest.

That critical assessment comes courtesy of a recent report by the Joint Legislative Audit and Review Commission, which conducted a study of the Virginia Small Business Financing Authority at the direction of lawmakers. It examined that agency as part of a broader look at the Department of Small Business and Supplier Diversity, under which the VSBFA operates.

JLARC routinely kicks the tires of state agencies — it reviews operations, checks finances, measures outcomes — to see what needs fixing.

In the case of the VSBFA, the study found an agency that could use a more streamlined evaluation process and a more generous outlook when evaluating potential loan recipients.

Since 2014, the VSBFA has operated as part of the Department of Small Business and Supplier Diversity, though with its own executive director and governing board. The agency offers loans to businesses and non-profits, credit to banks to support such organizations and bond financing all in the name of job growth and economic development.

It’s important work, and VSBFA has been trustworthy stewards of Virginians' tax dollars in carrying out that mission. Businesses which received money through loans from VSBFA or through banks via credit lines backed by the VSBFA lauded the agency help, which JLARC judged to be effective.

But the report knocked the agency, not for wasting money, but for its stinginess.

“VSBFA’s loan programs used only 10% of their available funds in [Fiscal Year 2019 3/8, leaving 90% of available funding unused. Similarly, VSBFA used only 8% of its available funds in 2018. These unused loan funds — $28 million in total — represent a lost opportunity for businesses,” the report states.

What’s more, the number of applications has declined significantly in recent years. The VSBFA received 145 applications for assistance in 2017 but only 72 in 2018 and 59 in 2019.

The JLARC reports the decline could be due to a number of factors — a robust economy makes private financing easier and perhaps even preferrable to taking money from the government — but notes the agency doesn’t do well to make its work known to businesses which might utilize it.

All things considered, these aren’t the worst problems to tackle. Economic development programs such as this are more likely to devolve into slush funds that require a stronger hand on the pocketbook rather a nudge toward more lending.

But these are legitimate and pressing concerns considering the economic conditions created by the coronavirus.

The VSBFA is the agency charged with administrating the $70 million Rebuild VA Grant Fund. The program is funded through the federal CARES Act money and intends to provide loans to small business affected by the pandemic.

These are businesses in crisis facing cost cutting, layoffs, even closure. Some are worried about what happens when the savings run dry. Some are simply trying to keep the lights on, hoping to survive until the COVID-19 crisis ebbs.

The worry is that after cutting through the bureaucratic red tape, small business owners will hit a brick wall at the VSBFA. And while the agency should be rigorous in evaluating potential lenders, keeping businesses operating may require more generosity than the VSBFA has shown previously.

SBSD Director Tracey G. Wiley told the Virginia Mercury that her agency is handling the huge influx in applications for assistance and has distributed between $1.5 million to $2 million of the CARES money to businesses in need.

That’s reassuring, but at a time when Virginia is depending on the VSBFA to throw businesses a lifeline, it’s imperative the agency do so smartly, quickly and unsparingly.

———

©2020 The Virginian-Pilot (Norfolk, Va.)

Visit The Virginian-Pilot (Norfolk, Va.) at pilotonline.com

Distributed by Tribune Content Agency, LLC.