State program aims to ease credit to businesses

Posted August 9, 2011 6:49 p.m. EDT
Updated August 9, 2011 6:57 p.m. EDT

— A new statewide program run through the North Carolina Rural Center is providing banks with a tool intended to encourage them to lend more money to small businesses and boost the state economy.

The North Carolina Capital Access Program, or NC-CAP, is designed to facilitate up to $800 million in loans over the next two years to businesses with fewer than 500 employees. The program matches fees paid by lenders and borrowers to create a pool that covers any loan defaults.

"What we do in making it easier is we contribute a part of the guarantee of that loan for the bank," said Billy Ray Hall, president of the Rural Center.

The program has already made 38 loans averaging more than $77,000 to restaurants, logging operations, convenience stores and Kelly Barefoot's fishing lure business.

Barefoot said he started making lures as a boy, and he turned it into a full-time business five years ago. His custom lures for bass anglers are now sold at Dick's Sporting Goods, Gander Mountain, local tackle stores and through his website.

"We're surviving and trying to expand," he said. "The loan itself allowed us to really branch out and try new things."

Harry Davis, an economist with the North Carolina Bankers Association, said increased regulations in the wake of the 2008 meltdown in the financial markets have put the squeeze on lending.

"I think the pendulum has swung too far the other way now, so that we're trying so hard to regulate we're acutally constraining growth," Davis said. "Banks are almost forced – at least some of them – to either stop growing or actually decrease their loans and actually decrease their size."

Fifty-eight banks, from giants like BB&T to community institutions like Roxboro Savings Bank, have signed up to participate in NC-CAP. Hall said he expects that to double by the end of the year.

The program is funded through $46.1 million the state received through the federal Small Business Jobs Act of 2010.