PIERRE, S.D. (KELO) — South Dakota employers that created jobs through loans from a specific state government program could be getting some temporary debt relief because of COVID-19.
Steve Westra, the governor’s commissioner of economic development, is proposing the policy for businesses that took loans from the state Revolving Economic Development Initiative fund.
The board will be asked to let the commissioner defer three months of payments for borrowers that can show their business was negatively affected by the respiratory disease.
It would further let the commissioner approve up to three subsequent months of interest-only payments for borrowers who were granted the initial three month deferment.
The borrowers would have to demonstrate, to the commissioner’s satisfaction, that COVID-19 is still causing a material negative impact on their business.
The Legislature created the REDI fund in 1987 at the request of then-Governor George S. Mickelson. A temporary 1-cent state sales tax was added to raise $40 million to start it.
South Dakota was suffering under an agricultural recession at the time. Mickelson saw low-interest loans from state government as a way to spur creation of jobs.
From its first loan in 1987 through June 30 of last year, the state board approved more than $275 million of loans, according to its 2019 annual report.
Currently the board has 44 REDI loans totaling $37,928,122, according to Mary Lehecka Nelson. She is deputy commissioner for the Governor’s Office of Economic Development that administers the program.
“We can’t predict how many businesses have been impacted significantly by COVID-19 and how many of those will request a deferment in payments, but it has the potential to affect all of the loans, should they all be impacted by COVID-19,” Lehecka Nelson said.
Asked how much interest would potentially be affected by the initial deferral, she said, “Nearly all our loans are at two percent interest, so interest during that month period would be approximately $200,000.”
Asked what standards the commissioner would use for reaching decisions, Lehecka Nelson replied, “Each borrower will be required to submit a request in writing for a deferment, detailing how the COVID-19 pandemic has affected their business.”
The governor appoints the 13 board members, subject to confirmation by the state Senate.
The most recent available report to the board on the REDI fund’s condition showed $118 million total of assets, investments and loans. Of that, about $19.6 million was designated for loans already approved by the board and $58 million was unrestricted for future use.