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How Connecticut Is Fighting for Small Business

Stocks in this article: AET GE HIG UST XRX

Next Generation takes place at the university level. The 10-year ambitious program aims to "expand educational opportunities, research, and innovation in the science, technology, engineering, and math (STEM) disciplines" at the University of Connecticut through strategic investments in facilities, faculty and students, among other things, according to its website.

Dane Stangler, director of research and policy at Ewing Marion Kauffman Foundation, says programs like the Small Business Express are more beneficial than just offering tax incentives to companies.

"The default for most policymakers and policy decision are things like taxes. It's not that taxes are irrelevant, but they're often much less relevant to entrepreneurs than politicians assume. There's other issues that entrepreneurs are worrying about more" like getting customers, licensing and hiring, Stangler says.

"The returns on those tax incentives have not been shown to be very good," Stangler says. "In a lot of cases those jobs don't stick around or never matriculate. States, just like a business, need to maintain their flexibility in how they respond" to economic challenges.

Stangler notes that labor laws -- particularly the enforcement of noncompete agreements -- is an important issue for states to consider when creating entrepreneurial communities. A state that has a very strict policy of enforcing non-compete laws can essentially derail the potential for an entrepreneurial community, whereas an enforcement policy that is more flexible, such as in California and Colorado, is where entrepreneurial communities can thrive.

Veteran employees in various industries such as technology are a "very important source of innovative entrepreneurship," he says.

How to Get State Funding

The program is open to all companies -- limited liability corporations, sole proprietorships, corporations, even nonprofit organizations that have fewer than 100 employees. The state asks for a one-page business plan of what the companies plan to do with the funding as well as their growth plans.

The state offers two types of loans -- loans for operating capital and loans that are potentially forgivable, up to 50% of the loan value, if it's used toward hiring.

Whereas banks will refuse loans due to a business' past performance, the state is more likely to give a loan if it sees sales growing again. Both types of loans have interest rates between 0%-4% based on "the company's ability to pay over time, and sometimes we will defer interest if we think that will help the company get going quicker," Smith said.

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