Projo Biz Blog

PROVIDENCE -- Gov. Carcieri and other state officials held a closed-door meeting this afternoon with small business leaders and accountants who represent those companies to talk about measures the state might take to reverse the credit crunch being faced by small businesses today.

After the meeting, the governor declined to offer any specifics about what actions the state might take, though he didn't rule out using taxpayer money in some fashion to encourage banks to loosen recent restrictions they've put on access to credit.

"I'm not getting into specific ideas that would maybe help," Carcieri said at a news conference at the State House after the meeting. He said he needed a few more days to "flush out" the ideas presented at the meeting.

The governor said he hoped to develop a "package of things" that may require changes in state law to address the credit crisis.

"The plans will be formulated," said Tom Celona, owner of Thrify Car Sales in Warwick and one of the meeting participants. "Today was just kind of an exploratory session. We gave him a million ideas -- some good some not."

Carcieri said the meeting explored two critical problems: the short term issue of small businesses not being able to borrow money as easily as they could in the past; and the bigger, long-term issue of how to grow jobs, which will require making the state more "tax competitive" with other neighboring states. "Right now, we're not," Carcieri said.

One of his big concerns, Carcieri said, is that the credit crunch will push the state's 8.8 percent unemployment rate even higher, should large employers be forced to cut back on spending and lay off workers.

"I am worried about further erosion," Carcieri said.

Saul Kaplan, executive director of the state's Economic Development Corporation, which is chaired by the governor, said that the credit problem is widespread throughout the state.

He said three months ago, economic development officials were discussing how companies could more easily access capital to grow their businesses. Today, many discussions are about how to make sure companies can have access to short-term credit lines in order to keep their business running.

"Today was about listening," Kaplan said. The goal is to create a public-private sector partnership to address the problem.

Mark Hayward, director of the Rhode Island division of the Small Business Administration, elaborated on the extend of the problem businesses are facing.

"There is a severe restriction of capital out there."

Some banks have tightened up standards under which they agree to loan money, and some have even closed credit lines to businesses altogether.

He said that SBA-backed lending so far this month is down considerably from the same period in previous years. Through yesterday, only 10 loans have been made, totaling $1.7 million. In the same period in 2007, there were twice as many loans made for a total of $3.25 million. Two years ago, there were 34 loans made totaling $5.29 million.

Carieri said the state does not have the funds to solve the problem on its own. "It's a credit issue," he said. "We can't" make taxpayers pay for a solution.

Asked whether he was ruling out using any taxpayer money as part of a solution, the governor said no. The state may "put some state money in, in some form," though he declined to elaborate.

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