State Borrows To Lend $9.5 Million to Three Businesses

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The Connecticut Bond Commission authorized state borrowing of $9.5 million, which will be lent to a manufacturer, a kitchen cabinetmaker/installer and an investment research firm at subsidized rates. The 10- to 12-year loans will be partially forgivable if companies meet their employment growth targets.

Hedgeye Risk Management LLC, headquartered in New Haven, where it has 27 workers, but also with a New York office with 25 workers, will consolidate in Stamford. It plans to spend $5,057,000 on offices there, and the state will lend $2.5 million of that amount at 2 percent. Half of that loan would be forgiven if the company adds 120 jobs. It is advertising for software engineers and a retail analyst in New Haven.

Express Countertops, Kitchens and Flooring LLC, of Hartford, will borrow $2 million to buy inventory, machinery and equipment at 3 percent, over 12 years. It will invest $425,000 of its own funds in the project, which includes an improvement to its warehouse. The company has 38 employees, and if it adds 50 jobs by 2016, it can reduce the principal by $750,000. It is advertising for a $40,000 a year project manager job.

APS Technology, a Wallingford manufacturer, will borrow $5 million at 4 percent over 10 years to buy machinery and fund product engineering. APS makes products used in oil and gas drilling, and expanded sales in China after the governor’s trade mission there.

APS has 155 workers in Connecticut, and plans to hire 128 workers over the next three years. If it meets that target, it could have $2 million of its $5 million loan forgiven. The total investment is expected to cost $10 million, with $2.5 lent by a bank, and another $2.5 million spent from the company’s own funds.

It is currently advertising for 14 jobs, including an electronics technician, a CNC machinist, a shop foreman, quality assurance inspectors, an assembly supervisor, mechanical and electrical engineers, a project manager, and a human resources generalist.

All three loan packages were arranged through the Department of Economic and Community Development. The borrowing was approved Friday.
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16 thoughts on “State Borrows To Lend $9.5 Million to Three Businesses

  1. HermanfromHartford

    So Malloy is getting the State of CT into the venture capital business with taxpayer dollars. Whats happens if the companies dont hit targets and cannot pay back the money?

    1. Mara Lee Post author

      He’s hardly the first. Rell and Rowland did the same. And Weiker did just grants.
      If they don’t hit the targets, they still owe the principal and interest (which would be profitable). But if they don’t have sufficient cash flow to pay back the loan? In the case of the manufacturing company, there’s plenty of collateral for any loan, but for others, I don’t know.

      1. HermanfromHartford

        Mara- excellent response. I find your business writings to be extremely insightful. You have strong business analytical skills.

    2. Allan

      So my tax dollars are going to support Hedge Fund guys who pay their own taxes at a 15% capital gains rate, while I pay at 35% plus? Maybe they might lend themselves some money??!! This is how the game is rigged so that the rich get richer……

    3. michael j hall

      they are not a vc firm Hedgeye team features some of the world’s most regarded research analysts united around a vision of independent, un-compromised real-time investment research as a service. Our research teams have buy-side experience, which adds uniqueness to delivering value-added research, insights and ideas to our clients. KEITH MCCULLOUGH a great CEO ct in good hands .

      1. Mara Lee Post author

        Herman was not suggesting Hedgeye is a VC firm, but rather the state itself acts as a VC firm by giving these loans. (Connecticut Innovations is more similar to a VC model than DECD, but I think what he’s getting at is clear.)

  2. Marc

    Here’s a wild and crazy idea, how about letting these businesses borrow this money from banks just like everyone else. Business have done everything in their power to destroy good decent government and then comes crying for State and federal dollars. Give them Mitt Romney’s address and let’s see if Mitt’s going to write them a check. After all, he’s in the business of making money. If he doesn’t deem them good enough for a loan, why should we? Let them pull their own bootstrap, at least, when they complain about government, it carries more weight.

    1. Mara Lee Post author

      Since all three are private companies, we don’t know that, but certainly the fact that APS is also getting bank financing suggests it is profitable. DECD, the state agency that made the loan, does have access to that sort of information, however.
      The state does invest in companies that are not yet profitable — in some cases, that don’t even have revenue yet — through Connecticut Innovations, its venture capital fund.

  3. Jan

    While I am dubious about the NB busway, at least it is potentially helpful at several levels. I’d feel better if the state had the money to lend instead of borrowing it. I thought we had a big deficit.

  4. Frank

    So the state continues to pay companies to hire employees. The Hedgeye jobs are subsidized at 10,000 per job. This is simply MONEY that Hedgeye gets to add to its revenues. This is a give away. There is no economic benefit. There will never be a shortage of companies to line up for press conferences to say what an enlightened administration we have here in Connecticut.

    For anyone who wants to really think for themselves and not accept these false truisms that just get handed down to the unthinking, I have one for you:

    THE OBJECT IS NOT TO CREATE JOBS

    Jobs are the end result of a productive economy. The Soviet Union had 99% employment when it collapsed. We could hire one half of the unemployed to dig holes and the other half to fill them.

    That makes about as much sense as giving money to companies to hire people.

    I can understand if you are a political hack, defending these loans, but to anyone else that is AWAKE, this is a complete fraud at every level.

    Wake up dummies. Figure it out. do the math.

    And it isnt any better if the State “had the money” to do it. If it was a good investment, private investors would do it.

    For all you that think it is a great investment, put up your own 401 k money for this type of investment. Of course no one would. But with someone else’s money, its worth the risk. Funny how that works.

  5. chimchim

    Why can’t the the companies just borrow from the lender? Why does the State have to be the middleman? And then end up with nothing in return? Somebody has friends in govermnent.

  6. Keith

    Welcome to our world (RI). Most states offer programs like this to retain or attract business. The key is for the lending organizations to do their homework or you can get burned Big Time. All you have to do is look at the 38 Studio (Kurt Schilling-Former Red Sox Pitcher) fiasco in RI. It will cost RI taxpayers over 100 million by the time we are done and knowbody knows where the money went. Oh and the bonds, ask who is able to buy the bonds?

  7. Mike

    By providing these loans the State is picking the winners in the private sector while exposing the taxpayers to the risk of investing. Providing start-up capital and operating expenses for private businesses is not a necessary government service.

    There are plenty of banks, investment houses and investors that would invest in these businesses, provided they have a sound business plan and any real expectation of fulfilling their obligations.

  8. sue

    Isn’t this what PRIVATE EQUITY is FOR. This is why OUR taxes continue to rise. SOCIALISTS LIKE DANNY BOY, JOHNNY BOY, SLEEPING BEAUTY AND KING LOWELL P. – AND YOU SHOULD KNOW WHAT THE P STANDS FOR – STEAL OUR MONEY TO GIVE IT TO GREEDY BUSINESSMEN. Since DANNY BOY is giving money away shouldn’t we GET SOME. CALL UP YOUR LIBERAL ‘RAT AND ASK FOR SOME

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