State Small Business Credit Initiative

The American Rescue Plan Act of 2021 (ARPA) included $10 billion to provide for a second round of State Small Business Credit Initiative (SSBCI).  The SSBCI was initially created through the Small Business Jobs Act of 2010.  Treasury’s implementation of the SSBCI program is designed to expand access to capital, promote economic resiliency, and create new jobs and economic opportunity.  The IBank submitted this summary of the SSBCI and California's applications.

SSBCI Funding

SSBCI will make both competitively awarded funds and allocations based on formulas. 

  • $6.5 billion for small business capital programs.  Initial application submitted December 11, 2021, and the final application is due February 11, 2022.

  • $1.5 billion in ARPA funds to be competitively bid by state governments for programs targeted to serve socially and economically disadvantaged individuals using a very similar formula as in the $6.5 billion allocation.

  • $1 billion is available as an incentive for states who do well in serving the needs of businesses owned and controlled by socially and economically disadvantaged individuals.  Provided in tranches II and III.

  • $500 million targeted to very small businesses (under 10 employees) using the same formula as in the $6.5 billion allocation, including independent contractors and sole proprietors.

  • $500 million to implement state small business technical assistance plans.  Application due March 31, 2022.

SSBCI Award Timelines

  • April 9, 2021 – US Treasury announced state formula allocations. 

  • May 10, 2021 – US Treasury announced Tribal government allocations.

  • December 11, 2021 – Initial applications to the US Treasury were due.

  • February 11, 2022 – Completed applications to the US Treasury are due.

  • May 11, 2022 - Applications for SSBCI capital programs from Tribal governments must be initiated and completed.

  • June 30, 2022 – Applications for SSBCI technical assistance funding from states, the District of Columbia, and territories are due (application portal forthcoming).  This deadline has been postponed from March 31, 2022.

  • July 11, 2022 - Applications for SSBCI technical assistance funding from Tribal governments are due.

Socially and Economically Disadvantaged Individuals (SEDI)

Federal law requires each application for capital access program funds to include a report detailing how SSBCI funds will provide access to capital for small businesses in underserved communities.  According to the SSBCI Guidelines:

  •  “Socially and economically disadvantaged individual” means an individual who is a socially disadvantaged individual or an economically disadvantaged individual, as defined in the Small Business Act.

  •  “Underserved communities” mean small businesses located in low- and moderate-income, minority, and other underserved communities, including women- and minority-owned small businesses. 

  •  “Treasury encourages states to consider the following areas when including plans regarding ‘other underserved communities’ in their report:  rural communities; communities undergoing economic transitions, including communities impacted by the shift towards a net-zero economy or deindustrialization; and communities surrounding Minority-Serving Institutions.”  

Under the SEDI incentive formula, California could receive up to $99.8 million for expending 48.87% of SSBCI Capital funds in a SEDI eligible business during the first tranche of SSBCI deployment.

Chart of Eligible SEDI Incentive Funding by State:  SEDI-Objectives-03-02-22.pdf (treasury.gov)

On March 3, 2022, the US Treasury published its Interim Final Rule on the demographic reporting requirements.  According to the press release, this information represents a "historic demographic information collection effort to measure equity outcomes" and will be used to "support the program’s commitment to expanding access to capital for businesses owned and controlled by socially and economically disadvantaged individuals (SEDI businesses)."  

Demographics-Related Reporting Requirements - Interim Final Rule

Best Practices and Lessons from 2011-2017

1.  Recycle capital as quickly as possible

2.  Manage risk to minimize loss

3.  Maximize capital availability

4.  Market the program effectively to generate deal flow and fee income

5.  Implement a flexible program design that is capable of adapting to changing lender and business needs

6.  Design programs in a manner that leverages outside funding resources

7.  Build and maintain stakeholder support

Source Link is available here

Additional SSBCI Resources

 

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