FILE - North Carolina state Rep. Jason Saine

North Carolina state Rep. Jason Saine, R-Lincoln

(The Center Square) – North Carolina lawmakers have proposed a bill that would funnel $25 million to a loan program to help small businesses in the wake of the response to the COVID-19 pandemic.

Members of the House Select Committee on COVID-19's Economic Support Working Group discussed a proposal Tuesday that would allocate state funding to a local nonprofit’s rapid loan program, meant to support small businesses while they wait for federal aid.

The Golden LEAF Foundation, an organization that supports rural and tobacco communities, launched a COVID-19 loan program March 24. As of Monday, the foundation had issued $4.1 million in loans to 116 applicants.

Sponsors of the proposal hope the additional funds will help the program cover more businesses.

“We want to be in a position to step forward and do a little more,” said Rep. Jason Saine, R-Lincoln, the working group's co-chair. “Part of what this is is putting some significant dollars to move things along, but, at the same time, recognizing that federal money is coming in.”

On March 27, President Donald Trump signed a $2 trillion coronavirus relief package, which allocates $350 billion in forgivable loans to small businesses nationwide. 

The Golden LEAF program provides bridge loans up to $50,000 for businesses with 50 or fewer employees with no payments for six months and a 4 percent interest rate. After six months, the interest rate will be less than 5.5 percent. Applicants would have to show documented proof of financial loss caused by COVID-19.

Golden LEAF has received 3,397 applications so far, with requests totaling  $121.5 million. The average application was for $35,767, according to Kasey Ginsberg, director of government affairs and programs for Golden Leaf.

Rep. Chris Humphrey, R-Lenoir, said he is concerned $25 million will not be enough to help all of the businesses in need.

“It looks like if $25 million were divvied up to give it out, $50,000 a piece, that would go to 500 small businesses,” he said. “And I know there are 913,000 small businesses in North Carolina. Just wondering how many businesses out of that 913,000 or 50 or fewer.”

Ginsberg said one-third of North Carolina’s small businesses have no more than 50 employees, and the goal of the program is to revolve the funds.

“So as someone secures federal program funding, they're able to repay this loan. We put that money back into the pool,” she said.

The $25 million would be allocated from the state’s general fund for the 2019-2020 fiscal year. Golden LEAF has to match $15 for every $25 the state provides. Therefore, the organization would have to match $15 million, which Golden Leaf already has acquired, according to legislative analysts.

General Assembly Senior Legislative Counsel Dan Ettefagh said the bill may face opposition because it is a way for the government to give gifts to private entities and puts the state in competition in the private sector, which would be a violation of the state’s constitution.

Ettefagh, however, argued a 1999 legal analysis from the attorney general says low-interest loans for disaster relief are acceptable since they address an emergency and serve a public purpose.