CS FOR HOUSE BILL NO. 412(FIN) "An Act establishing the Alaska microloan revolving fund; making loans for commercial purposes from the fund; relating to the fund and loans; and providing for an effective date." 3:08:46 PM GREG WINEGAR, DIRECTOR, ALASKA DIVISION OF INVESTMENTS, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, explained that the bill is modeled after other micro-loan programs offered throughout the United States. A similar program is not yet available in Alaska due to a lack of a qualified intermediary lender as required by the Small Business Association (SBA). He expounded the goal of providing loans for up to $35 thousand for an individual and $70 thousand for two or more individuals. The loan proceeds are available for working capital, inventory, lease hold improvements, and other business related matters. The loans must be collateralized. He informed that the fiscal note requests $81 thousand in operating expenses to hire a loan officer to process loan requests. The fund is established as a revolving fund. The department supports the bill. 3:11:13 PM Co-Chair Stedman pointed out one fiscal note from the Department of Commerce, Community and Economic Development (DCCED) for $3,577,700 in Alaska Industrial Development and Export Authority (AIDEA) dividends to capitalize the fund. He expressed concern with the issue of capitalization as it is abnormal to capitalize a fund with a fiscal note. He cited an over appropriation of the fund. According to Legislative Finance, the AIDEA funds have been expended in the FY11 budget. He asked about the state as a banking institution versus the private sector. Mr. Winegar responded that he was under the assumption that a new fiscal note had been prepared. He stated that the loan amounts are small and short term with higher risk. He stated that the SBA makes the program available in 46 other states for the same reason. 3:13:09 PM TED LEONARD, EXECUTIVE DIRECTOR, AIDEA stated that the proposed loan program is not an AIDEA program. He mentioned that AIDEA's strategic planning process during a spot analysis of the Alaska economy identified a gap in the tools available to help small businesses. He voiced that he was once the Chief Financial Officer (CFO) for a small corporation. He explained that cash flow is the blood of a small business. The business cycles do ebb and flow and occasionally a business requires a loan to allow a business to continue. He stated that the small economic development supported the need for helping small businesses with capital. While the program is not an AIDEA program, he did support the goal of helping small businesses with working capital. 3:15:06 PM CARL BERGER, EXECUTIVE DIRECTOR, LOWER KUSKOKWIM ECONOMIC COUNCIL (via teleconference) testified in support of the legislation. He noted that the support extends to other small communities. The amount provided is exactly what communities require. He stated that Alaska is one of four states without a microloan program. MIKE BORGFORD, MADE IN MAT-SU, MATSU (via teleconference), testified in support of the legislation. He claimed that HB 412 was the most important small business legislation in the last 30 years. MARTY METIVA, PRESIDENT, ALASKA PARTNERSHIP FOR ECONOMIC DEVELOPMENT (via teleconference), testified in support of the legislation. He stated that the situation analysis of the state's economy provided a statewide economic strategy implementation plan. He stated that the raw data from the analysis includes that from over 300 business community leaders. He noted that the two key findings addressed include the access to the capitol. He believed that HB 412 compliments the existing financing opportunities. 3:20:47 PM TRACY LABARGE, TRACY'S KING CRAB SHACK, testified that she is a small business owner who purchases her inventory form local fisheries. She worked with Juneau Economic Development Council (JEDC) and local banks to establish creative methods of financing. She stated that she requires a loan for inventory. She stressed that the bill allows her business the opportunity for success. 3:23:17 PM Senator Olson asked if $35 thousand was enough to capitalize a small business. Mr. Winegar responded that the amount of $35 thousand is patterned after the SBA program. The private sector is a better place to obtain larger amounts of capital. He specified that HB 412 targets smaller loans. HB 412 was HEARD and HELD in Committee for further consideration.