Newspaper article THE JOURNAL RECORD

Senate OKs Finance Program Link-Up

Newspaper article THE JOURNAL RECORD

Senate OKs Finance Program Link-Up

Article excerpt

Journal Record Staff Reporter

Legislation aimed at bridging the gap in Oklahoma's financing programs has passed the state Senate, and supporters are optimistic that by the end of the session there will be more ammunition in the economic development arsenal.

Senate Bill 991 would create a new equity capital program using the resources of the Oklahoma Development Finance Authority. Principal authors are Sen. Ted Fisher, D-Sapulpa, and Rep. Don McCorkell, D-Tulsa.

"We think that basically out there, there's a lot of companies that are growing, smaller companies, that need some working capital-type investment," said Jim Fulmer, president of the Oklahoma Finance Authorities, the umbrella term for the ODFA and the Oklahoma Industrial Finance Authority.

"They're just short of capital in order to be able to grow and prosper," he said. "All we at the agencies can loan money on is land, buildings and equipment. We're not an equity lender and we can't invest in deals at this time, but it (new program) would be a way to get equity capital in small, growing companies."

Senate Bill 991 would correct a portion of the well-known Quality Jobs Act passed last year. It included a capital investment component which ultimately was determined to be onerous and frankly unconstitutional, according to Fulmer.

Senate Bill 991 would erase the original program and start fresh. "The new law basically allows the ODFA board to invest in companies that would provide equity or near equity capital, up to a total of $30 million," Fulmer said.

"About the only requirement in this deal is that the private capital, in the company that ODFA would invest in, would be at risk first, before the state's money. And, it would give the board of directors of ODFA the latitude to decide what entities to invest in."

To illustrate, Fulmer described a hypothetical economic development group in Muskogee which might band together and raise $1.5 million to form a small business investment corporation. The ODFA, through its Credit Enhancement Reserve Fund program, could raise another $1.5 million to invest in the company. "Now, they have $3 million, but their investment would be at risk before ours would be," Fulmer said.

Small business investment corporations are a type of entity licensed by the U.S. Small Business Administration. SBICs, as they are called, are a good example of the kind of organization that would be a candidate for the new financing, but it would not be limited to those, Fulmer said.

"Who knows what kind of deals we'll be looking at? It (the bill) would give the board the opportunity to look at `Is this a good deal for the state?' in terms of filling the void that's out there," he said.

By "equity" or "near-equity" financing, state economic developers are referring to a corporation, such as a small business investment corporation, that would make some equity investments in small, growing companies that could be converted to stock, Fulmer said. …

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