Governor signs bill to raise capital where funding is difficult
Alabama Governor Kay Ivey on Monday signed a law to provide capital to small business owners in rural and poor Alabama. House Bill 473 was sponsored by State Rep. Danny Garrett, R-Trussville.
One of the most difficult aspects of running a small business is accessing capital. This is even more difficult if your small business is in a very rural or poor area of the state of Alabama, especially if you are a minority or in the agribusiness.
Garrett explained that HB473 – titled Alabama Rural, Agribusiness, and Opportunity Zone Jobs Act – creates a fund for struggling business owners to access the capital they need.
Garrett explained that the funds would come from $ 25 million in American Rescue Act dollars that the state will receive in the coming year to help small businesses. Growth funds would be allowed to access this capital, provided they set up at least one individual matching of their own dollars, to invest in a qualifying business in Alabama.
Garrett explained that investment growth fund managers would match those dollars on an individual basis to create a $ 50 million source of capital for qualifying companies. No government dollars would be used for this purpose.
Garrett said the company receiving the funds must be a qualified small business in Alabama that has tried and failed to raise capital from conventional lenders. The participating growth fund could come from Alabama or out of state.
Garrett said 50% of the fund’s money must be provided to businesses in counties under 50,000 according to the 2020 census and 25% must be in a qualified opportunity area.
Eligible businesses must have fewer than 200 employees and must be located in a designated growth area.
By law, skilled jobs created or maintained under the law must pay at least 110 percent of the average wage in that county and require at least 35 hours of work per week or any other period generally accepted by custom, the industry, or work as a full-time job.
Garret said at least 25 percent of the fund’s loans must go to minority-owned businesses.
The legislation defines a minority-owned business as a “business owned more than 50% by one or more persons of African American, Asian or Hispanic origin”.
A growth fund seeking to tap this source of finance must present “a business plan that includes a revenue impact assessment projecting state and local tax revenues, as well as reducing government spending.” State, to be generated by growth investments proposed by the applicant prepared by a nationally recognized third party. -independent economic forecasting firm using a dynamic economic forecasting model which analyzes the candidate’s business plan over the 10 years following the date of filing of the request to the ministry.
The applicant must also present “a letter of credit issued to the applicant by a depository institution equal to at least 50% of the amount of the requested investment authority or similar proof that the applicant has obtained a corresponding capital equal to this amount “. as “a non-refundable application fee of twenty thousand dollars ($ 20,000) payable to the ministry.”
“Within 30 days of receipt of a completed application containing the information set out in paragraph (b), the ministry accepts or denies the application.”
Participating growth funds must have at least $ 50 million in assets under management. It was originally $ 100 million, but the Senate lowered the threshold so that more funds could participate in the program.
“At least 50 percent of growth investments must be made in agro-industry or minority-owned businesses and at least 75 percent of growth investments must be made in rural areas or areas of opportunity. . ”
The 2021 legislative session ended on May 17. The regular session is limited to only 30 legislative days by the Alabama Constitution of 1901. The next regular session will be held in January. There will be a special session at the end of the year or at the beginning of January to deal with the redistribution.
A special session is possible this summer or early fall to issue a bond issue to build new prisons. Special gambling interests are pressuring the governor to call a special session to meet their wishes for a constitutional amendment allowing casinos.