Oregon lawmakers have approved a bill expanding access to capital for companies that are too new or too risky to qualify for conventional bank loans.

Under the bill, Business Oregon would raise the cap on direct loans to startups through its Entrepreneurial Development Loan Fund to $1 million, up from the current, temporary limit of $250,000. Business Oregon is the state’s economic development agency.

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House Bill 4015 passed both chambers with bipartisan support and now goes to Gov. Kate Brown for her signature.

The measure only applies to loans made through the Entrepreneurial Development Loan Fund (EDLF). That program is intended to bridge a funding gap for startups and early-stage companies, helping them through the first few years of operations before they can typically qualify for private loans.

Economic development officials told lawmakers the program’s loan limits have long been outdated.

“Many small businesses have lending needs that far exceed the old program,” said John Saris of Business Oregon at a public hearing earlier this month.

Until recently, EDLF loans were capped at $100,000. Lawmakers approved a temporary boost — to $250,000 — during the pandemic. And now they’ve agreed to expand the program’s capacity further.

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Oregon State Capitol building, May 18, 2021. The capitol was completed in 1938.

Oregon State Capitol building, May 18, 2021. The capitol was completed in 1938.

Kristyna Wentz-Graff / OPB

Saris said supply chain shortages, rising wages, and growing real estate costs have added up for small businesses still weathering the pandemic.

“And in the end, those costs being driven up are raising the lending needs of companies that don’t qualify for private debt,” he said.

The measure permanently expands loan eligibility to businesses with less than $1.5 million in revenue or fewer than 25 employees. The bill does not change collateral requirements, but it does reduce how much equity business owners are required to put into their projects.

The EDLF program was created in 1991, according to Business Oregon. It made only three loans in both 2019 and 2020, the agency said, and 11 loans last year.

By expanding eligibility and loan amounts, Business Oregon hopes to boost those lower numbers.

No public opposition to the bill was raised during legislative hearings. The measure has no projected fiscal or revenue impact.

At a senate hearing last week, some lawmakers did flag concerns that as loan amounts rise, defaults could cost the public program more.

Scott Bruun of Oregon Business & Industry, a powerful business alliance, urged lawmakers to approve HB 4015. The bill was unlikely, he said, to help the group’s current members — but it could help grow new ones.

Brown is expected to sign the bill.

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