The U.S. Department of the Treasury announced yesterday that five states have received approval for their plans submitted under the new round of the “State Small Business Credit Initiative” (SSBCI) program.
Frequently referred to as SSBCI 2.0, the program was reauthorized and expanded under the “American Rescue Plan” after it was deemed as highly successful in increasing access to capital for traditionally underserved small businesses and entrepreneurs. The new SSBCI builds on this successful model by providing nearly $10 billion to states, the District of Columbia, territories, and Tribal governments to increase access to capital and promote entrepreneurship, especially in traditionally underserved communities as they emerge from the pandemic. The new SSBCI funding is expected to catalyze up to $10 of private investment for every $1 of SSBCI capital funding, amplifying the effects of this funding and providing small business owners with the resources they need to sustainably grow and thrive.
Tennessee and the other state governments submitted plans to Treasury for how they will use their SSBCI allocation to provide funding to small businesses, including through venture capital programs, loan participation programs, loan guarantee programs, collateral support programs, and capital access programs. The five states whose proposals have been approved and the details announced in the news release from Treasury are:
- Hawaii, approved for up to $62,021,957, will launch new loan participation and credit enhancement programs, including HI-CAP Loans and HI-CAP Collateral, with two-thirds of its allocation. These programs will expand access to capital for underserved communities by lending to projects that will diversify Hawaii’s economy and lessen its reliance on tourism, which incurred high rates of business failures and unemployment during the COVID-19 pandemic. Hawaii will also operate a venture capital program, the HI-CAP Invest program, which will include investments in impact funds that target early-stage businesses focused on social or environmental change in Hawaii.
- Kansas, approved for up to $69,596,847, will operate a loan participation program, the GROWKS Loan Fund, and an equity program, the GROWKS Angel Capital Support Program, with over 80 percent of its funds. These programs will expand access to capital for underserved communities by providing companion loans and equity investments with varying levels of SSBCI support. Kansas estimates that approximately 40 percent of businesses supported will be women-owned and 20 percent will be minority-owned small businesses.
- Maryland, approved for up to $198,404,958, will operate eight loan and equity investment programs through Maryland Department of Housing and Community Development (DHCD), Maryland Department of Commerce and Maryland Technology Economic Development Corporation. Among the approved programs is the Maryland Small Business Development Financing Authority (MSBDFA), a program at the Department of Commerce, which will expand access to capital for underserved communities by targeting loans to underserved businesses. Maryland anticipates that 70 percent of new loans in the SSBCI-funded program will be provided to minority-owned businesses and 40 percent to women-owned businesses. Maryland will also use $17 million to fund the Neighborhood Business Works Venture Debt Program, which will expand access to capital for underserved communities by lending alongside venture capital equity in high-growth businesses located in qualified low-income communities, anchoring the businesses in these communities through federal tax incentives that require them to remain in low-income communities for several years.
- Michigan, approved for up to $236,990,950, has been an innovator in developing credit support programs given the challenges of the manufacturing sector there for the last several decades. Michigan’s top industry assisted in the previous iteration of SSBCI, in both lending and venture capital, was manufacturing. With these funds, the state will operate the Michigan Business Growth Fund Collateral Support Program with nearly one-third of its allocation. This existing program provides cash collateral accounts to lending institutions to enhance the collateral coverage of borrowers so that they qualify for loans. Historically the program has targeted industries with high wages and high job growth potential, such as manufacturing, medical device technology, engineering, and agribusiness. Michigan will expand the program to reach smaller service and retail businesses disproportionately hurt by COVID-19.
- West Virginia, approved for up to $72,104,798, will operate a seed capital co-investment fund with more than half of its allocation, increasing small businesses’ access to venture capital in a state with no resident venture capital firms and average annual venture capital investment well below the per-capita national average. The fund will focus on expanding access to capital for underserved communities by providing equity investments matched with private equity from angel investors or venture capital funds. Statewide and regional nonprofits and community development financial institutions (CDFIs) will partner with community banks and CDFIs to use the remaining balance of the funds for two loan programs that will serve the needs of West Virginia businesses.