SENATE BILL REPORT

SB 5665

BYSenators Smitherman, Fleming, Warnke and Bender

Authorizing funding for assistance to small business incubator projects.

Senate Committee on Commerce & Labor

Senate Hearing Date(s):February 23, 1987; March 4, 1987

Majority Report:  That Substitute Senate Bill No. 5665 be substituted therefor, and the substitute bill do pass and be referred to Committee on Ways & Means.

      Signed by Senators Warnke, Chairman; Smitherman, Vice Chairman; Anderson, Lee, Sellar, Tanner, Vognild, West, Williams.

Senate Staff:Jack Brummel (786-7428)

                  March 4, 1987

Senate Committee on Ways & Means

Senate Hearing Date(s):March 5, 1987

Majority Report:  That Second Substitute Senate Bill No. 5665 be substituted therefor, and the second substitute bill do pass.

      Signed by Senators McDermott, Chairman; Gaspard, Vice Chairman; Bauer, Fleming, Kreidler, Moore, Owen, Rinehart, Talmadge, Vognild, Warnke, Williams.

Minority Report:  Do not pass.

      Signed by Senators Cantu, McDonald, Rasmussen, Zimmerman.

Senate Staff:Stephen Rose (786-7443)

                  March 13, 1987

AS REPORTED BY COMMITTEE ON WAYS & MEANS, MARCH 5, 1987

BACKGROUND:

Small businesses have proven to be the major source of new jobs in Washington.  Because small businesses have high failure rates, assistance which lowers their failure rate can improve the state's job creation record.  Small business incubators have been promoted as an effective means of providing the technical assistance that small businesses need.

SUMMARY:

The Department of Community Development's Local Development Matching Fund Program is supplemented with monies set aside for small business incubator projects.  The funds for such projects may be used for feasibility studies, planning, initial operating expenses and delivery of technical assistance to small businesses, both within and outside the incubator.

Appropriation:    $200,000

Fiscal Note:      available

EFFECT OF PROPOSED SUBSTITUTE:

Senate Bills 5588 (Small Business Loan Program) and 5589 (Investment Opportunities Office) have been combined with Senate Bill 5665.

The Small Business Loan Program creates a loan reserve fund administered by the State Supervisor of Banking and an executive director appointed by the Governor.  A premium charge is negotiated between the lender and the borrower when a loan is made under this program.  The premium charge is put into the loan reserve fund.  The state makes a matching payment to the loan reserve fund.  The premium charge and the matching payment are registered in the bank's name and may be used to cover future losses from any loans registered in the program by that bank.  Payments made to cover losses on loans made under the program are limited to the amount in the fund attributable to the bank suffering the loss.  Reports on the program are to be made to the Governor and the Legislature.  The appropriation for the Small Business Loan Program is $1 million.

The Washington Investment Opportunities Office acts as a clearinghouse for entrepreneurs seeking capital and investors seeking good investments.  The Office keeps a list of entrepreneurs in the state looking for capital resources and provides prospective investors with information about these entrepreneurs.  The Office remains current with national trends and preferences in capital markets and provides timely information to both investors and entrepreneurs.  The appropriation for the Investment Opportunities Office is $200,000.

EFFECT OF PROPOSED SECOND SUBSTITUTE:

Grant funds are not available for initial operating expenses of incubators.  Referrals between the Investment Opportunities Office and the Small Business Innovators' Opportunity Program are required.

The appropriation is stricken, and a severability clause is added.

Senate Committee - Testified: COMMERCE & LABOR: Senator Fleming; Fred Goldberg, Gary Smith, Independent Business Association; Keith Hopper, Washington Bankers Association; William Lotto, Economic Development Executives of Washington; Jackie Lum, Rainier Valley Enterprise Center

Senate Committee - Testified: WAYS & MEANS:  No one