Banks will not back new business, but the federal government will. The state has accepted $46.1 million from the federal deficit by way of the new NC Capital Access Fund forged under the Small Business Jobs Act of 2010. It is a “tool” that will “create jobs” and “help small business.” The tool is expected to loan $800 million to small businesses. Federal dollars are used to match fees (2-7%) paid by either the borrower or lender. The fees go into a pool where they may be withdrawn to cover losses from defaults.
The N.C. Rural Economic Development Center operated a similar and successful program from 1994-2008. During that time, $3.6 million in the reserve generated $103 million in business loans. A total of 1,850 loans allowed businesses to create or retain more than 27,000 jobs.