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Small business state aid seen succeeding as Connecticut extends lifeline to faltering firms

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HARTFORD, Connecticut — For the most part, small businesses in Connecticut receiving state financial aid to create jobs are not permitted to fail.

Of the 1,284 small businesses receiving loans and grants since 2012, 25 went out of business, or fewer than 2 percent, according to the Department of Economic and Community Development.

The Department of Economic and Community Development will not pull the plug on companies when they wobble. The agency uses a "watch list" of companies that are slow to repay loans or experiencing cash flow problems, Commissioner Catherine Smith said.

So far, the agency has restructured 44 small business agreements.

"We'll change the terms, maybe they don't pay as much," Smith said. "We try to be accommodating."

The result is that Smith said she believes the state is "performing better than most private sector banks."

The law enacted by the legislature and Gov. Dannel P. Malloy in 2011 to help spur job creation authorizes the economic development commissioner to partner with lenders to "fulfill the requirements" of the assistance.

Andy Levine, president of Development Counsellors International, which markets countries, regions and municipalities and also focuses on economic development, said state assistance extending beyond initial help is unusual.

"I've not heard of that low a failure rate," he said.

State Sen. Rob Kane, who opposes state subsidies to prod business to hire or relocate, questioned the effectiveness of the program if the state can continually assist companies that are otherwise in danger of failing.

"In theory it's a good idea," he said. "The problem is it's political. They're working to save it so they don't look bad."

Through March 6, the state program provided $186 million in grants and loans primarily to spur job growth. Most of the assistance, $101.9 million, was in loans tied to job creation, according to the state development agency. Matching grants and revolving loans made up the remainder.

The state says 4,765 jobs were created and 13,570 were retained. That amounts to about $10,150 per job, a "pretty low level of subsidy," Smith said.

Levine said the dollar amount per job is modest compared with high-profile projects luring major employers.

"It's one thing to help a small company with 20 jobs or five. It's another thing for Texas to attract a Toyota manufacturing facility," he said.

Companies receiving state aid include insurance firms, restaurants, office furniture retailers, construction companies, printing businesses and many others. Small businesses are defined as employers with no more than 100 workers, registered to do business for at least one year and up to date on all state tax payments.

Priority will be given to companies creating jobs and working in precision manufacturing, sustainable technology, bioscience, information technology and other sectors.

One recipient said the program has been very helpful despite a "lot of paperwork" to qualify. Robert H. Lord Co., a family business in Manchester that sells furniture to schools, libraries and other institutions and businesses, received $100,000 in grants and $200,000 in loans at 4 percent interest.

The money allowed the business to add five workers to its staff of 20 and refurbish the company's showroom, co-owner John Lord said. The state aid helped drive revenue up 25 percent year over year, Lord said."I would never have done this without it," he said.

Andrew Markowski, Connecticut State Director of the National Federation of Independent Business, did not support or oppose the program, but questioned its effectiveness.

"Generally speaking, most of our members are not necessarily looking for assistance from state government," he said.

But because Malloy also initiated a program to bring large employers to Connecticut with a mix of loans and grants, small businesses expected to be included, Markowski said.

Smith points to the low failure rate and few aid agreements that had to be restructured as a sign of success.

"The feedback we're getting from users is phenomenal," she said. "They're putting people to work, putting money in equipment."


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