A state legislative working group unanimously recommended Tuesday tripling the amount — from $25 million to $75 million — the state will give to a program that would offer low-interest loans to small North Carolina businesses.

The Golden Leaf Foundation would distribute the state-funded emergency loans, which would be up to $50,000 and require no payments for up to six months with a loan term of up to 66 months.

Interest rates would be no more than 4% and the businesses must have fewer than 100 employees and be based in North Carolina.

Golden Leaf was chosen because it has a similar disaster-relief loan program already in place. Golden Leaf has already committed to providing $15 million toward the state loans, bringing the total amount of loan money to $90 million.

Democratic Gov. Roy Cooper said he supported the initiative, in part because “it can act quickly to get funding to small business owners” as the federal Paycheck Protection Program has dried up for now.

“Small business is the lifeblood of our economy. We owe it to them to help keep them afloat until it is safe to begin easing the (stay-at-home) restrictions.”

Majority and minority leaders of the N.C. House and Senate said in a joint statement Tuesday: “We jointly support budgeting additional funds to Golden Leaf to expand its bridge loan program for North Carolina businesses.

“The program has proven to be efficient and effective. We will work together to provide a substantial allocation to Golden Leaf that will be worked out in more detail between now and the beginning of the General Assembly session.”

Other changes made since the bill was presented April 14 is that instead of a hard cap at 50 employees, a lender “shall require a lender to prioritize loans for establishments with 100 or fewer full-time equivalent employees as of the state of emergency, and are independently owned by a qualifying business.”

Kasey Ginsberg, director of government affairs for Golden Leaf, said that as of Tuesday, the nonprofit had received 4,037 applications requesting a combined $139.4 million. The average loan request is about $34,525.

Some of those loans have been withdrawn, so there are more than 3,000 applications pending, she said.

Ginsberg said that as of April 14, 116 loans had been approved for a combined $4 million.

The proposed state program comes as small businesses wait on federal Paycheck Protection Program loans. The U.S. Small Business Administration said Thursday that it had exhausted its initial $349 billion in PPP funding.

“The loans would be the first monies and meant to hold over (small businesses) until they receive federal funding,” said Dan Ettefagh, a member of the legislature’s bill drafting division.

Recipients of the state small business loans would be required to repay it once they received federal PPP funding.

“It’s meant to be the help of last resort,” Ettefagh said.

From the beginning, lawmakers acknowledged that the program needed more money.

House speaker Tim Moore, R-Cleveland, said Tuesday he was able to come up with another $50 million for the program, and “it will be money well spent.”

“There’s a critical need for help for small businesses,” Moore said. “We need to maximize those federal dollars before extending state dollars, and that’s whether we’re talking about what this task force is working on, education or anybody else.”

Much of the $90 million in bridge funding and any applicable interest rate would returned to the General Fund, some of which could be used for additional loans.

“This idea seemed to generate little controversy during House committee discussion, so it’s likely to get pretty good support in that chamber,” said Mitch Kokai, senior policy analyst for Libertarian think tank John Locke Foundation.

“Senators are also interested in helping small businesses return to action, so that bodes well for the legislation.”

Kokai cautioned that “the challenge with the legislation — as with other emergency relief measures — is to ensure that the strong desire to do something doesn’t overwhelm the need for safeguards and prudence.”

“State lawmakers don’t have an unlimited supply of taxpayers’ money. They will need to consider the trade-offs involved with this bill and others designed to reverse the government-imposed economic lockdown.”

The federal PPP loans will be fully or partially forgiven if businesses show that 75% of the money was used to retain or rehire employees, and the rest to pay some infrastructure expenses, all through June 30. Loan payments will be deferred for six months.

Many large banks — such as Bank of America Corp., Truist Financial Corp. and Wells Fargo & Co. — are limiting their loans to existing business customers.

That means some small businesses may be on the outside looking in if they don’t have an existing loan relationship with a large bank or their bank is too small to participate.

There is a growing sentiment that North Carolina has been short-changed by the federal PPP to date.

North Carolina is the country’s ninth largest state at 10.61 million residents and poised to surpass Georgia.

However, N.C. ranked 16th in terms of loan dollar commitment at just more than $8 billion, and 15th in number of approved loans at 39,250. A Bloomberg News report found that 53% of N.C. applications have been approved.

“We’re been trying to understand the (PPP) process from a data perspective, but also anecdotally, for those who have been unable to get a loan compared with those that were,” said Peter Gwaltney, president and chief executive of N.C. Bankers Association.

“We know there was such a crush of demand for these loans.”

rcraver@wsjournal.com

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