Texas Senate Bill SB1602

Texas 2009 - 81st Regular

Caption

Relating to creating a microloan guarantee program using funds appropriated to the Texas Enterprise Fund.

Impact

The implementation of SB1602 is expected to significantly impact state laws concerning economic development initiatives by introducing a structured approach to microloans. By guaranteeing these small loans, the program hopes to foster an environment conducive to entrepreneurship and job creation. It opens up new pathways for funding, particularly for start-ups and small businesses that are often the backbone of local economies. The program will also encourage financial institutions to be more willing to lend to these smaller entities, knowing that they have the state's backing in case of defaults.

Summary

SB1602 seeks to establish a microloan guarantee program funded by the Texas Enterprise Fund, specifically aimed at supporting small businesses in Texas. By allowing businesses to secure loans of up to $10,000 through participating financial institutions, it aims to create and expand job opportunities across the state. This program is designed to eliminate barriers for businesses, particularly those that may struggle to obtain traditional financing due to insufficient credit or collateral. The bill mandates that a minimum of one percent of the Texas Enterprise Fund must be allocated to this initiative, emphasizing the state's commitment to bolstering its economic landscape through accessible financial assistance.

Contention

While SB1602 has potential benefits, there are areas of concern among critics regarding the allocation of state funds and the possibility of increased default rates on guaranteed loans. Some opponents argue that the program might incentivize financial institutions to issue loans to high-risk applicants, leading to a burden on taxpayers if large numbers of defaults occur. Additionally, the effectiveness of such small loans in promoting sustainable business growth is questioned by those who advocate for a more comprehensive approach to economic development. As the bill progresses, discussions around its potential unintended consequences and oversight mechanisms are likely to be a focal point.