Update to MELF and SBA Programs

As you have heard by now, $85 million was moved from the Machinery and Equipment Loan Fund (MELF) and $95million from the Small Business First Fund (SBF) to balance the budget. These are both long standing revolving loan funds with specific missions and lending criteria. It should be noted that the budget passed by the General Assembly called for $100 million from each fund. PEDA did communicate with DCED and the Governor’s office that this was very problematic, so the Governor did restore $15 million to MELF and $5 million to SBF in his line item veto. Unfortunately, it is probably not enough.

Here is what we know so far. SBF should not be impacted since lending is limited to $200,000 per project, however the MELF program will likely not be able to fund any new applications, including the large number of applications received just prior to June 30. We suggest that if you have a MELF application in to DCED, you call MELF staff to get a read on status. We also suggest that you do not talk to clients about MELF without first checking with MELF staff. We understand previously committed GAT deals should be funded, but again check with MELF staff if you or a client are involved in such a deal. We understand MELF staff is working to move some projects from MELF to other loan programs.

There are repayments still coming into the MELF Fund, but it will likely take a few years to re-build a loan pool, that will never be a large as the old program without an appropriation in a future budget. Given the state’s on-going fiscal crisis due largely to the pension crisis, until the pension issue is resolved the future of MELF, as well as other DCED programs are in question for future budgets.

This update is brought to you by the Pennsylvania Economic Development Association.