Missouri's state treasurer wants to rewrite the program that uses state tax money deposits to support loans to small businesses in an effort to make more companies eligible for the low-cost cash.
Treasurer Clint Zweifel visited General Sign Co. in Cape Girardeau today to explain how his ideas would help support job creation while increasing yields for taxpayers. Zweifel, who took office in January, is also asking the Missouri Legislature to change the laws governing state deposits to allow him to seek higher interest rates.
Under Missouri's linked-deposit loan program, the state makes deposits in community banks, which in turn lend money to businesses and farmers at below-market interest rates. But the program is limited to businesses with 25 or fewer employees and to farmers who have less than 60 percent equity in their farming operation.
Zweifel wants to raise the limit for businesses to 100 employees and eliminate the limitation on farm loans. In addition, he wants to increase the amount businesses can borrow to cover capital needs that support their employment growth.
"This will be an incentive to reinvest inside our state," Zweifel said.
The other change Zweifel is seeking will benefit the state treasury overall. On average, the state has $250 million to $500 million in time deposits -- similar to CDs -- at any one time. That money must be deposited in a Missouri-based bank and state law ties the interest rate to U.S. Treasury securities that mature over a similar period.
For example, a six-month T-bill was earning 0.51 percent on Thursday, and has earned as low as 0.39 percent in the last month. If the law tying state investments to treasury rates was repealed, the state could seek banks willing to pay an amount closer to the average six-month certificate of deposit rate.
Zweifel estimated that the change could result in $10- to $15 million in additional interest income to the state each year.
Zweifel said he came to General Sign because it fits the profile of businesses that could be helped by changes in the linked-deposit law.
General Sign makes pylon signs and other outdoor signs for businesses, said Russ Wilson, manager of the Cape Girardeau plant. With about 50 employees, the company makes signs for business such as American General Finance and Shelter Insurance agencies. Under the current rules, the company would not be eligible for a linked-deposit loan.
The company has no immediate need for capital, Wilson said, "but we would like to be able to use it if we need it."
The recession has hit the company like most firms, Wilson said. General Sign has laid off 10 workers since October, but Wilson said the firm is maintaining itself. "Thank god we haven't had to shut the door."