Help Companies Access Capital to Grow

We know that if companies are not able to access credit and investment capital, for start-ups or to grow and expand, economic recovery will stall. This is a very complex and very important challenge and unfortunately there are no easy or quick solutions.

When we use the words “capital access” many often think immediately of “venture capital.” And while venture capital is a very important part of Oregon’s economic picture, very few companies are actually the targets for venture. Furthermore, larger companies still have access to capital through financial institutions even though the lending criteria may be more stringent than they were a year ago. The real problem is for the small and mid-sized businesses which not only provide the majority of jobs in Oregon but which will be very important for both short term and long term economic growth. These are the businesses which have traditionally relied on community bank loans to access the capital they need.

Yet our community banks are in deep crisis of their own – struggling with the burden of devalued real estate loans and higher capital asset requirements imposed by federal regulators. In many cases these community banks do not have the capacity to make loans even if they wanted to. The reality is that credit access to the small business sector is very tight and will remain tight over the next 18 to 24 months.

As a result Oregon must place a high priority on developing creative strategies to address this problem until the financial markets recover. Some possible approaches (which will be discussed in more detail later in this paper) include:

• Renewable energy projects Targeted use of incentives like the business energy tax credit can stimulate and catalyze capital to flow to Oregon rather than to other states.

• Direct foreign investment China needs to find ways to invest its substantial currency reserves. Companies like XCMG (the largest manufacturer of cranes in the world) are looking to create a North American presence by investing in manufacturing and energy projects.

• Oregon’s public and private forests There is a growing recognition of new economic values within our forest sectors which can attract capital investments. These include carbon sequestration and other ecosystem services; and the use of woody biomass for energy production.

• Maximize the value of federal stimulus investments This involves steps like organizing and coordinating investment targets; assisting private sector businesses access federal loan programs; and supplementing federal allocations in ways that attract additional private or public investors. Oregon has a limited capacity for the latter step as the state budget crisis will make it difficult to make large moves in this direction. With only limited state funds available, it is imperative for us to maximize and leverage additional private investments with our dollars, targeting capital assistance toward our greatest opportunities for job retention and growth.
  

• Provide expertise and services to high job growth or “second stage” businesses This involves working to connect these businesses to the customers and suppliers that will drive their growth.

• Connect private, state, and community financing with private union retirement fund financing Union pension funds are often utilized to finance construction projects that create work for union members. Most frequently these funds are invested to help provide bridge financing to meet project needs. There is a clear opportunity for collaboration on such vital job creating projects.

The expectation is that credit for both consumers and businesses will remain tight through the year as bad loans and lending practices continue to work their way through the system. Until this situation improves considerably, Oregon must aggressively pursue opportunities to make capital available to business of all sizes. None of the actions identified here are a substitute for recovery of America’s banking and financial system. However, it is imperative that the Governor, the state and business leadership work closely together to focus on both short and long term solutions.